USD/JPY is edging higher as traders position ahead of the latest US Nonfarm Payrolls report. The pair has rallied alongside a firmer US dollar amid mild risk-off flows and elevated geopolitical tensions. With 158 looming as a key technical level just overhead, traders are assessing whether the rally can extend or if event risk could trigger a pullback.
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USD/JPY Moves Toward 158 as NFP Approaches
While there is no imminent threat of NATO’s Article 5 being triggered — the prelude to World War III — we are also no closer to an end to the war in Iran. Iran’s missile towards Turkey certainly raises the odds of escalation beyond the Middle East, and for as long as the Strait of Hormuz remains effectively closed, oil prices are likely to remain elevated and may move higher. There are some hopes — even if unfounded — that an agreement could be reached to de-escalate the war. However, with the US House rejecting a resolution to block further Iran strikes without congressional approval, we are clearly not there yet.
Source: LSEG
Mild Risk-Off Flows Lift the US Dollar as Oil Climbs
- Crude oil edged higher on Thursday, with Brent reaching a two-year high of $86.86, although volatility remained low.
- WTI crude oil rose more than 6% to tap $82, with its daily range reaching 181% of its 10-day ATR.
- Gold formed a small bearish outside day and respected 5200 as resistance for the second consecutive session.
- Dow Jones futures led Wall Street indices lower, with the S&P 500 down -0.85% and the Nasdaq 100 down -0.7% at the time of writing.
- The US dollar was the strongest FX major during a mild risk-off session, while AUD/USD and NZD/USD were the weakest, falling -0.9% and -0.7% respectively.
- The Japanese yen and Swiss franc also weakened against the US dollar, leaving the greenback as the currency of choice for risk-off flows ahead of today’s Nonfarm Payrolls report.
USD/JPY Technical Analysis: US Dollar vs Japanese Yen
There appears to be a fine line between a rally extension and a reversal on USD/JPY, and that line seems to sit at 158. This key level has so far marked the week’s high, and Wednesday’s pullback likely excited bears who argued that Tuesday’s modest rally was actually a false break — or bull trap — above the 9 February high. Yet that pullback is already under threat, with a wider-ranging bullish outside day forming just beneath 158.
158 Could Be A Key Level For Traders.
It is possible the Japanese yen strengthens into the weekend as it attracts safe-haven flows ahead of potential Middle East headlines and the risk of weekend gaps, which would be bearish for USD/JPY. However, today’s Nonfarm Payrolls (NFP) report may only need to deliver a reasonably solid set of figures to reinforce expectations that the Federal Reserve is unlikely to cut rates anytime soon.
The 1-hour chart shows a strong bullish trend, bouncing along the 50- and 20-hour EMAs. Bulls may look to buy dips towards Thursday’s low (156.44) in anticipation of a break above 158 and a move towards 159 or even the 159.45 high. Whether price can break above the latter could hinge on a broader move higher in the US dollar, with a strong NFP report acting as the potential catalyst.
Source: ICE, TradingView
Economic Events in Focus (AEDT / GMT+11)
- 11:00 — USD Fed Goolsbee Speaks (EUR/USD, USD/JPY, GBP/USD)
- 18:00 — GBP Halifax House Price Index (Feb) (GBP/USD, EUR/GBP, GBP/JPY)
- 22:00 — EUR Germany Car Registrations (Feb) (EUR/USD, EUR/GBP, EUR/JPY)
- 22:30 — USD Factory Orders, Factory Orders ex Transportation (Jan) (EUR/USD, USD/JPY, GBP/USD)
Saturday, March 7
- 00:30 — USD Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Participation Rate, Average Weekly Hours (EUR/USD, USD/JPY, GBP/USD)
- 00:30 — USD Retail Sales, Core Retail Sales (EUR/USD, USD/JPY, GBP/USD)
- 02:00 — CAD Ivey PMI (Feb) (USD/CAD, CAD/JPY, EUR/CAD)
- 02:00 — USD Retail Inventories ex Auto, Business Inventories, Wholesale Inventories (EUR/USD, USD/JPY, GBP/USD)
- 02:15 — USD FOMC Member Daly Speaks (EUR/USD, USD/JPY, GBP/USD)
- 04:00 — USD Atlanta Fed GDPNow (Q1) (EUR/USD, USD/JPY, S&P 500)
- 05:20 — USD Fed Collins Speaks (EUR/USD, USD/JPY, GBP/USD)
- 05:30 — GBP BoE Hauser Speaks (GBP/USD, EUR/GBP, GBP/JPY)
View the full economic calendar
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
