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It’s NFP day, yo!

With not a lot of major data releases due in early London trading, I got my eyes on USD/JPY approaching a key inflection point.

Before we talk setups, lemme list down the top headlines from the late U.S. and early Asian session trading:

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Upcoming Potential Catalysts on the Economic Calendar:

  • Japan’s leading indicators at 5:00 am GMT
  • Germany’s factory orders at 7:00 am GMT
  • France’s trade balance at 7:45 am GMT
  • U.K.’s Halifax house price index at 8:30 am GMT
  • Italy’s retail sales at 9:00 am GMT
  • BOE’s Bailey to give a speech at 12:15 pm GMT
  • U.S. NFP reports at 1:30 pm GMT
  • Canada’s labor market data at 1:30 pm GMT

What to Watch: USD/JPY

USD/JPY Daily Forex Chart
USD/JPY Daily Forex Chart

Positive earnings reports, higher U.S. Treasury yields, and optimism over Uncle Sam’s post-pandemic growth prospects have pushed the dollar higher across the board so far this week.

USD/JPY, in particular, has already gained about 80 pips in the last few days alone.

The pair is now near the 105.50 area that lines up with the 200 SMA on the daily time frame.

Thing is, the 106.00 major psychological handle and key support and resistance level is not too far from the current prices.

If today’s non-farm payrolls (NFP) reports hint at a faster-than-expected recovery for the U.S. economy, then we could see USD/JPY break above 106.00 and maybe start a longer-term uptrend.

But if the NFP numbers disappoint, or if the market’s optimism turns into an anti-dollar party, then USD/JPY could find resistance at the 200 SMA and dip back down to the 100 SMA levels.