With the U.S. ADP report only a few hours away, I thought we should take a look at USD/JPY’s retracement opportunity.
Fresh Market Headlines & Economic Data:
- U.S. crude stocks rose in latest week -API
- AU construction downturn eases in January 2020 as house building activity improves
- NZ unemployment has fallen to 4.0% from 4.1%, while wages have risen by 2.6%, which is the most since 2009; RBNZ seen as putting interest rates on hold
- China’s services sector growth hits three-month low in January: Caixin
- Oil prices climb as OPEC, allies weigh output cuts to cushion coronavirus impact
- BOJ signals readiness to ease as virus impact clouds outlook
- Coronavirus will see economy shrink in March quarter: ANZ
- RBA’s Lowe: jobs key for further rate cuts
- Lowe: bushfires and the coronavirus will only be short-term problems for the Australian economy
- Lowe: governments need to borrow more, rate cuts still on agenda
- Coronavirus cases rise above 24,000 as Hong Kong reports first death
Upcoming Potential Catalysts on the Forex Calendar:
- Switzerland’s SECO consumer climate data at 6:45 am GMT
- Spain’s services PMI at 8:15 am GMT
- Italy’s services PMI at 8:45 am GMT
- France’s final services PMI at 8:50 am GMT
- Germany’s final services PMI at 8:55 am GMT
- Euro Zone’s final services PMI at 9:00 am GMT
- U.K.’s final services PMI at 9:30 am GMT
- Euro Zone’s retail sales at 10:00 am GMT
- ECB’s Lagarde to give a speech in Paris at 12:15 pm GMT
- U.S. ADP report at 1:15 pm GMT
- U.S. and Canada’s trade balance numbers at 1:30 pm GMT
What to Watch: USD/JPY
A strong U.S. equities market and risk-friendly trading environment have helped push USD/JPY above a descending trend line on the 1-hour time frame. The pair has since consolidated, however, which opens it up to a potential retracement.
If today’s U.S. ADP report prints lower than markets’ already weak expectations, then we could see USD/JPY give up some of its gains and revisit 109.10. As you can see, the level lines up with a 38.2% Fib as well as a previous resistance area.
MarketMilk currently supports the pair’s “bullish” trend on the 1-hour chart. If USD/JPY does find support at the level, then dollar bulls can use it as a springboard for a possible move higher. This week’s highs near 109.50 and the big 110.00 areas would make for good profit targets.
If today’s ADP release prints better than expected, then we could see USD/JPY trade higher without a significant retracement. Just take note of the USD/JPY’s average daily volatility when placing your profit and stop loss targets.