USD/JPY – How Far Could it Pullback?

USD/JPY – How Far Could it Pullback?

USD/JPY – How Far Could it Pullback?

Fundamentals

The U.S. dollar had a great run over the past 3 weeks but now that Non-Farm Payrolls, the ECB, BoJ and FOMC rate decisions are behind us, we are looking for a correction. When the Fed upgraded its assessment of the labor market, they set expectations for a very strong non-farm payrolls report and unfortunately Friday’s jobs number failed to impress, sending the dollar lower against all of the major currencies. While the miss was small it was enough to drive U.S. rates lower. With Friday’s retail sales report being the only major U.S. economic release on next week’s calendar, the dollar could fall further as investors use the low level of U.S. rates as reason to take profits near key levels in USD/JPY. This does not mean that the dollar’s uptrend is over but there’s an opportunity for a pullback down to 112.30.

Technicals

Taking a look at the daily chart of USD/JPY, the correction on Friday was the largest one day decline for the currency pair since mid October. 114 is a near term support level that if broken would pave the way for a decline to 112.30. 112 should hold. If USD/JPY takes out its 6 year high of 115.58, the next stop should be the October 2007 high of 117.95.

Chart Of The Day

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