USD/JPY Retreats – Look for Buyers on the Dip

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USD/JPY Retreats - Look for Buyers on the Dip

NFP-Push:
USD/JPY rallied after Friday’s strong US jobs data that showed 248K jobs being added in September while the unemployment rate fell to its 6-year low at 5.9%.

The USD/JPY was consolidating ahead of the NPF, but found support at 108. After the release of the jobs data, it surged above 109.00, but stalled before testing the 110.00 handle which represents the current 2014-high. As we begin the week, we can see that price has retreated. But as we get into the 10/6 US session, we should probably expect buyers above 109.00.

USD/JPY 1H Chart 10/6
usdjpy 1h chart 10/6

(click to enlarge)

Buying on a Dip:
If USD/JPY has turned bullish again after Friday’s jobs data, it should find support in the cluster of 200-, 100-, and 50-hour simple moving averages (SMAs). Also, with the 1H RSI back at 40, we can expect another bullish attempt toward the 110 high.

So far we are indeed seeing a rebound from the cluster of SMAs. If we see a bearish attempt fail to take out the current low on the day, we can be more confident that bullish continuation is the mode. Even if price does slide a bit lower, we should anticipate possible support in the 108.95-109.13 area, which contain some previous support/resistance pivots.

Price top Scenario:
A break below 108.80 would reverse the entire NFP-reaction, and would signal a consolidation, bearish correction in the USD/JPY. This scenario would essentially reflect failure of strong US data to push USD/JPY into new highs, suggesting it is possibly due for a consolidation/correction.

USD/JPY Daily Chart 10/6
usdjpy daily chart 10/6

(click to enlarge)

Support after Topping:
If this is the case, we should first look for the 108.00 level to break, at which point, we would see a price top in the daily chart. Then we can start looking for support when price reaches 38.2% retracement of the May-Oct. rally from 100.82 to 110.08. Also, note that if the price top has a 200-pip width, we can expect a break to the downside for about 200-pips, but maybe shorten that expectation because it goes against the prevailing trend.We should also anticipate support when the daily RSI approaches 40.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.