USD/JPY: Shellshocked in Sino/US cold wars and awaits nonfarm payrolls/OPEC events

  • USD/JPY has been on the recovery of the downside inspired by a bloodbath in global equities overnight. 
  • USD/JPY is currently trading at 112.69, up from a low of 112.23 having fallen from 113.15 in a continuation of the late November slide from the 114 handle

USD/JPY is motionless in Tokyo, shellshocked by events overnight as traders now wait for what might come from the highly anticipated OPEC meeting and nonfarm payrolls report. 

The US indexes managed to somehow climb their way higher in an impressive turnaround from some of the worst levels for Thursday whereby the DJIA had, at one stage, lost 785 points at its worst levels and the S&P 500 dropped 0.17% to 2,695.95. Final figures showed also showed that the Dow Jones Industrial Average, DJIA, ended lower by 79 points, or 0.3%, to 24,948. 

It figured that the US 10yr treasury yield would fall from 2.92% to 2.83% – the lowest since August – but it then recovered to 2.87%. The 2yr yield fell from 2.80% to 2.70% then back to 2.75%. Fed funds rate futures repriced the chance of a December rate hike from 75% to 70%.

Three immediate risks for the dollar

As far as the dollar goes, it really all does depend on, 1) what the OPEC and non-OPEC members come up with respect to a solution to the oil glut, as well as, 2) how Washington will respond to Beijing’s demands over the recently arrested Meng Wanzhou, the chief financial officer of Huawei Technologies, by the Canadian authorities and lastly, 3) the nonfarm payrolls report. 

“The US November employment report dominates the global calendar. The median forecast for non-farm payrolls on Bloomberg is 198k, after the rapid 250k in Oct. The unemployment rate is seen holding at 3.7% while average hourly earnings are seen up 0.3%mth, which would keep the annual rate at 3.1%, equalling the high since 2009,” analysts at Westpac explained.

USD/JPY levels

  • Support levels: 112.20 111.90 111.60
  • Resistance levels: 112.70 113.00 113.35

Valeria Bednarik, Chief Analyst at FXStreet explains that from a technical point of view, the risk remains skewed to the downside:

“In the 4 hours chart, the pair is developing well below its 100 and 200 SMA and with the shortest about to cross the longer one to the downside, while technical indicators head south, the Momentum retreating from its mid-line and the RSI nearing oversold levels. The 100 DMA is a key psychological support and if it gets broken, the decline will likely gain traction, with the next possible bearish target coming at 111.60.”