Source: Economic Events February 1, 2019 – Admiral Markets’ Forex Calendar
Once again, it is the first Friday of the month – a day when market participants are given a deeper look into the US employment situation via the Non-Farm Payrolls.
After the above ADP expectation report was issued on Wednesday, which came in at 213k (expected: 178k) with only a slight downward revision of the numbers from December (down from 271k to 263k), it seems likely that the path is leveled for a solid NFP reading.
While the outlook for a solid NFP reading would usually be interpreted as a bullish expectation for a yield-sensitive currency pair such as the USD-JPY, today’s NFPs are overshadowed by the FED rate decision last Wednesday. As the FED’s statement pointed out, it is prepared to adjust the balance sheet runoff ‘in light economic and financial developments’.
As a result, 10-year yields of US treasuries fell back below 270 basis points, and a weaker than expected NFP reading today (in our opinion, every reading below 150,000) could not only trigger further losses in US yields but also likely make a test of the monthly lows around 255 basis points.
However, it could also trigger further weakness in USD-JPY and place focus on the region around 107.70/108.00 in the days to come. A sustainable break below that region would make further losses likely, and a re-test of the Flash Crash lows around 105.00 a serious option:
Source: Admiral Markets MT5 with MT5SE Add-on USD-JPY 4-Hour chart (between November 15, 2018 to January 31, 2019). Accessed: January 31, 2019 at 10:00 PM GMT – Please note: Past performance is not a reliable indicator of future results, or future performance – In 2014, the value of USD-JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.
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