- The USD/JPY rallied again during the trading session on Thursday as the ADP numbers came out much hotter than anticipated.
- This is people thinking that the Federal Reserve will have to stay tight going forward, and with the jobs number coming out on Friday, there’s a very good chance that we will continue to see volatility.
- At this point, we must start asking questions as to whether this pair has found a bit of a bottom. After all, we tested the ¥130 level and then bounced.
I would also point out that the area right around the ¥130 level extends down to the ¥128 level as far as I can tell. In other words, it’s a “zone of support” that we will be paying close attention to. The 200-Day EMA sitting just above and near the ¥135 level opens the possibility of a move much higher. This is going to come down to interest rate differential and of course perceptions as to what the Federal Reserve is going to do next. It’s been astonishing to watch Wall Street simply talk about the Federal Reserve as if they are not going to fight inflation and would be more worried about the stock market and what Wall Street is making or losing.
Job Numbers Could Have an Outsized Impact
This is understandable, because quite frankly for the last 14 years, the Federal Reserve has done everything Wall Street wanted. This is how we got here, so there’s a certain amount of corrective behavior that needs to be seen. Every time there is more of a “risk on rally” on Wall Street, it makes the Federal Reserve must dig in its heels even deeper. Until we break this cycle, I suspect that we will continue to see a lot of volatility as “hopium” continues to thrive in investment houses.
On a solid move above the ¥135 level, I think at that point you start to see a resumption of the longer-term uptrend. On the other hand, if we were to turn around and slice through the ¥128 level, then I think you have a situation where we could start to fall apart from there, perhaps dropping down to the ¥125 level. Ultimately, the job number could have an outsized impact, so you should be aware of that.
Ready to trade our daily Forex analysis? We’ve made a list of the best Forex brokers worth trading with.