Bullish NFP Data Could Drive USD/JPY into 123.193 – 123.643

The Dollar/Yen resumed its rally on Friday, ahead of a key U.S. jobs report that could cement the potential for a 50 basis-point Federal Reserve interest rate hike next month.

At 08:50 GMT, the USD/JPY is trading 122.575, up 0.874 or +0.72%. On Thursday, the Invesco Currency Shares Japanese Yen Trust ETF (FXY) settled at $76.95, up $0.01 or +0.01%.

The USD/JPY could move sharply higher on Friday because a strong jobs report could give the Fed more confidence to keep its aggressive rate-hiking plan in place this year to stifle inflation without fear of slowing the economy too much.

Economists expect that about 490,000 jobs were added in March, according to the consensus estimate from Dow Jones, following a 678,000 payrolls addition in February. The Unemployment Rate is expected to fall to 3.7% from 3.8%, according to Dow Jones.

Average Hourly Earnings will be of particular interest for investors because they represent wage inflation. According to estimates, Average Hourly Earnings are expected to rise 0.4%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 125.101 will reaffirm the uptrend. A move through 114.651 will change the main trend to down.

The minor trend is also up. A trade through 121.284 will change the minor trend to down. This will shift momentum to the downside.

The minor range is 125.101 to 121.284. Its retracement zone at 123.193 to 123.643 is the nearest upside target.

The short-term range is 114.651 to 125.101. Its retracement zone at 119.876 to 118.643 is a potential downside target.

The main range is 113.472 to 125.101. Its retracement zone at 119.286 to 117.914 is another potential downside target.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Friday is likely to be determined by trader reaction to 121.700.

Bullish Scenario

A sustained move over 121.700 will indicate the presence of buyers. This is potentially bullish. If this move is able to generate enough upside momentum then look for a surge into 123.193 – 123.643.

Aggressive counter-trend sellers could come in on the first test of 123.193 to 123.643. They will be trying to form a potentially bearish secondary lower top.

Trend traders are going to try to drive the USD/JPY through 123.643. They are going to try to challenge the main top at 125.101.

Bearish Scenario

A sustained move under 121.700 will signal the presence of sellers. This is potentially bearish. If this move creates enough downside momentum then look for a retest of the minor bottom at 121.284.

Taking out 121.284 will shift momentum to the downside and could trigger an acceleration into the series of retracement levels from 119.876 to 117.914.

Side Notes

A close under 122.093 will form a weekly closing price reversal top. If confirmed next week, this could trigger the start of a 2 to 3 week correction.