USDJPY has been rallying steadily, getting its latest boost from the stronger than expected US employment report. As it turns out, the economy added 280K jobs in May, higher than the projected 222K gain for the month.
The pair was able to make a strong break past the 125.00 major psychological level after the report was released, zooming up to a high of 125.84 before profit-taking took place. USDJPY could pull back a little further before resuming its climb.
On the 1-hour chart, a rising trend line can be drawn to connect the latest lows of price action. This rising support area also lines up with the longer-term exponential moving average, which has held as support in the past.
Price could retreat to the 124.50 minor psychological support at the trend line and EMA before resuming the uptrend back to the previous highs and beyond. Earlier today, Japan reported an upward revision in its Q1 GDP reading from 0.6% to 1.0%, allowing the yen to regain ground.
Event risks later on this week include the US retail sales report, which might show a 1.1% increase for the headline figure and a 0.7% gain for the core figure – both of which would mark stronger gains compared to the previous period. Higher than expected increases might allow the US dollar to extend its rallies against its rivals, as this would confirm that growth prospects are improving and that the Fed can stay on track to tighten in autumn.
On the other hand, weaker than expected US reports could lead to a break of the short-term USDJPY trend line and possibly a larger correction for the pair. Stochastic is pointing down on the 1-hour time frame, suggesting that sellers are in control of price action for now until the pair draws additional buying pressure possibly at the nearby inflection points.
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