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James Hyerczyk

The Dollar/Yen is trading slightly lower early Thursday. The light selling is probably related to profit-taking and position-squaring after Wednesday sharp rise and ahead of Friday’s U.S. Non-Farm Payrolls report. The fundamentals remain bullish and clearly stacked in favor of the U.S. Dollar.

Yesterday, the Dollar/Yen soared to an 11-month high, boosted by fresh U.S. data and hawkish comments from Federal Reserve Chairman Jerome Powell that point toward a more aggressive central bank.

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At 0446 GMT, the USD/JPY is trading 114.376, down 0.169 or -0.14%. This is also down from yesterday’s 114.580 high. The next upside target is 114.728. This is major resistance from the week-ending November 10, 2017. The longer-term charts open up to the upside over 114.728 with the next major upside target coming in at 118.658.

The Forex pair was supported early in the session after the ADP National Employment Report showed private payrolls jumped by 230,000 jobs in September, posting its largest gain since February.

Shortly after the release of the jobs data, the USD/JPY extended its gains after the Institute for Supply Management’s (ISM) non-manufacturing activity index jumped 3.1 points to 61.6 last month, the highest reading since August 1997.

Fed Chair Jerome Powell also made supportive comments. He added to the bullish tone for the U.S. Dollar when he said on Wednesday that the central bank may raise interest rates above an estimated “neutral” setting as the “remarkably positive” U.S. economy continues to grow.


The next barrier for USD/JPY investors is 114.728. Taking out this level with conviction should trigger a breakout to the upside. As mentioned earlier, there is plenty of room to the upside so we could see a runaway rally.

Of course, the U.S. Dollar needs a catalyst to trigger another steep rise. Yesterday, it was a jump in U.S. Treasury yields to multi-year highs with the 10-year yield reaching a seven-year high and the 30-year yield hitting a 4-year high.

If this week’s economic data continues to impress than yields are likely to continue to rise, making the U.S. Dollar a more attractive investment.

There are not a lot of negatives at this time that could derail the rally. However, investors should continue to monitor the situation between Italy and the European Union since another flare-up could cause a flight-to-safety rally into the Japanese Yen.

Furthermore, the Dollar/Yen could weaken if the Trump administration turns its attention to the dollar and tries to check its rally. President Trump has on numerous occasions expressed displeasure at the dollar’s strength.

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