NFP Reaction: The USD/JPY fell at the end of last week after the NFP jobs report disappointed. However, let’s not be too fast in appraising a bearish outlook and monitor the price action this week for more clues.
Bears not so Impressive Bullish Scenario: The 4H chart shows the NFP reaction. The 4H candle around the reaction was sharp, but there was not follow-through below 118.75 yet. Let’s say there is a pullback. A bearish market should find resistance at 119.50. However, if USD/JPY breaks above 120, we are very likely going to see a bullish continuation. It would basically reflect a market shaking off the poor jobs data. In this scenario, we can anticipate an attempt to push towards 121.70 (2014-high) to 122.00.
Bearish Scenario; Central Pivot: Let’s say price holds under 119.50 for the most part, forgiving some intra-session violation as long as it comes back below 119.50 within the next session. This would reflect bearish control and put pressure on a key support around 118.20. This is a previous support pivot, and also the central pivot of the multi-month consolidation range seen in the daily chart.
Range Support: A break below 118.20 would essentially keep the USD/JPY in consolidation in the medium-term, and open up a short-term bearish outlook towards the 115.56-116 range support area.
Double Top or Just a Consolidation Range? Now, the USD/JPY is bullish in the long-term or at least since making the record low of 75.56 in late 2011. So, we should respect the 115.56-116 consolidation range support if 118.20 does not hold as one.
This also means that a break below 115.50 would complete a double top in USD/JPY and signal the evolution of its medium-term consolidation into a more bearish correction mode. This scenario, would open up the 110 handle and previous resistance area back in September/October 2014.
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