USD/JPY maintains bullish trend on Fed anticipation

<p>USD/JPY surged early on Wednesday as anticipation of the Federal Reserve’s mid-December meeting continued to build, pushing the US dollar up against most major currencies […]</p>

USD/JPY surged early on Wednesday as anticipation of the Federal Reserve’s mid-December meeting continued to build, pushing the US dollar up against most major currencies before the greenback gave back much of those gains later in the day.

Since mid-October, when a clear daily hammer candle spiked down to major support around the key 118.00 level, USD/JPY has rebounded sharply along a well-defined uptrend line as a Fed rate hike in December increasingly came to be expected.

USD/JPY Daily Chart


The last Non-Farm Payrolls (NFP) report in early November far exceeded expectations, prompting a dramatic breakout above prior resistance at 122.00. Since that breakout, USD/JPY has remained strong, but has essentially traded in a range for the past three weeks. The high of that range in mid-November was around the 123.75 level, which was approached early today before the dollar’s gains were pared in the afternoon.

With not much in the way of key data events for the yen during the remainder of this week, all eyes will be focused on the dollar and how it may be affected by the new NFP and Unemployment Rate reports that will be released this Friday. If Wednesday’s significantly better-than-expected ADP private employment report can serve as any indication of Friday’s official job numbers, USD/JPY could soon see a breakout above the noted 123.75 range high and a continuation of the recent bullish trend. In the event of this breakout, the next major upside target and a key resistance barrier resides at the 125.00 level, which was last reached in August.

Only a substantially worse-than-expected employment number on Friday would likely derail the dollar’s recent strength. In this event, a dollar pullback may lead to a USD/JPY breakdown below the noted uptrend line that goes back to mid-October. Any near-term breakdown of this nature should find relatively strong support around the noted 122.00 level, which has turned from resistance to support after November’s breakout.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.