Bearish View
- Sell the USD/JPY pair and set a take-profit at 129.81.
- Add a stop-loss at 133.90.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 132.97 and a take-profit at 134.50.
- Add a stop-loss at 130.
The USD/JPY exchange rate pulled back sharply after the latest American non-farm payroll (NFP) data. It dropped to a low of 132.08, the lowest level since January 5. It has fallen by more than 2% from the highest point last week as the focus shifts to the upcoming US inflation and corporate earnings data.
US Non-Farm Payrolls Data
The Bureau of Labor Statistics (BLS) published strong jobs numbers for December. According to the bureau, the economy added over 235k jobs in December, which was better than the median estimate of 200k. These numbers mean that payrolls increased by 4.5 million in 2022.
The numbers came at a time when many American giant corporations are implementing large-scale layoffs. Amazon is slashing over 18,000 jobs while Salesforce announced that it will shed 10% of its workforce. Other companies like Meta Platforms and Twitter are also laying off their staff.
Additional data showed that the unemployment rate dropped from 3.7% in November 3.5% in December. This rate is close to its lowest point in over 50 years. The only blemish in the report was the country’s wages, which rose by 4.6% in December. The falling wage growth is a victory for the Federal Reserve, which is attempting to fight elevated inflation.
The next major catalyst for the USD/JPY exchange rate will be the upcoming American inflation data scheduled for Thursday. Economists polled by Reuters expect the data to show that the headline inflation dropped for the third straight month.
Precisely, they expect that the headline CPI rose by 6.5% in December from 7.1% in the previous month. Core inflation, which excludes the volatile food and energy prices, is expected to have dropped to 5.7%. There is a possibility that inflation continued dropping as natural gas prices and gasoline have continued falling.
USD/JPY Forecast
The USD/JPY pair retreated after the latest American jobs numbers. It fell to the standard pivot point and below the 25-day and 50-day moving averages. On the four-hour chart, the Relative Strength Index (RSI) moved slightly below the neutral point of 50. The MACD and the Stochastic Oscillator has also drifted downwards.
Therefore, the pair will likely continue falling as sellers target the second resistance point at 129.86. A move above the resistance point at 133 will invalidate the bearish view.
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