USD/JPY Reaction to 114.909 – 115.248 Sets Short-Term Tone

The Dollar/Yen rose on Friday after a surprisingly strong January jobs report fueled a surge in U.S. Treasury yields, making the U.S. Dollar a more attractive investment as it widened the spread between U.S. government bond yields and Japanese government bond yields.

The world’s largest economy created far more jobs than expected, raising the chances of a larger Federal Reserve interest rate hike in March.

On Friday, the USD/JPY settled at 115.192, up 0.208 or +0.18%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $81.41, down $0.17 or -0.21%.

Following the U.S. jobs data, U.S. rate futures implied more than five rate hikes this year, or about 131 basis points in policy tightening. The probability of a 50 basis-point increase next month rose to about 32% from 18% before the data release.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 115.686 will signal a resumption of the uptrend. A move through 114.162 will change the main trend to down.

The minor range is 115.686 to 114.162. The USD/JPY settled on the strong side of its pivot at 114.924, making it support.

The short-term range is 116.345 to 113.472. Its retracement zone at 114.909 to 115.248 is potential resistance. The USD/JPY closed inside this zone.

On the downside, the main support zone is 114.442 to 113.992.

Short-Term Outlook

The direction of the USD/JPY early Monday is likely to be determined by trader reaction to 115.248.

Bullish Scenario

A sustained move over 115.248 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 115.686. This is a potential trigger point for an acceleration to the upside with 116.345 the next major target.

Bearish Scenario

A sustained move under 115.248 will signal the presence of sellers. This could trigger a break into the 50% level at 114.909. Taking out this level could trigger an acceleration into 114.442 to 113.992.