USDJPY Takes out 107.00 – Can it Go Higher?
|Market Drivers April 5, 2018
UK PMI Servivces misses
US Trade on deck
Nikkei 1.53% Dax 1.63%
Oil $63/bbl
Gold $1327/oz.
Bitcoin $6800
Europe and Asia:
GBP UK PMI Services 51.7 vs. 54
EUR PPI 1.6% vs. 1.5%
North America:
USD Trade Balance 8:30
USDJPY sprinted past the 107.00 level for the first time this week boosted by better equity flows in both Japan and Europe where the bourses rose by more than 1%.
The pair was able to recover after yesterday’s swoon in the face of China’s announced tariffs suggesting that it may have found a tradable bottom over the past few weeks around the 105.00 level.
Meanwhile, in the UK the PMI Services report came in woefully weaker than forecast printing at 51.7 versus 54.0 eyed. That is dangerously close to the 50 boom/bust line and suggests that UK economy continues to slow down even as the market is expecting a rate hike form BoE.
According to Markit, this was the weakest activity in 20 months partly due to severe weather in the UK. On the other hand backlog of work increased and business optimism about future demand remained high., The market shrugged off the results, notching them up to one-off weather effects and GBPUSD was able to hold the 1.4000 level. Still, it remains to be seen if the decline in services demand – the biggest part of UK economy – is more than just a one-month aberration and will make next month’s data that much more critical for the market to consider.
As political turmoil out of DC begins to recede, the FX markets will once again focus on the economic data and to that point tomorrow’s NFPs loom large as a possible positive catalyst to take USDJPY higher. If both job and wages beat the forecast, the markets could finally become convinced that US rate hike path is assured. That should translate into a rally in yields and possible breakout of USDJPY beyond its recent ceiling of 107.00 as tries to mount a rally towards 110.00
Today, however, the calendar is relatively barren with only the Trade data on the docket which could spur a bit more selling in USDJPY if it comes in much worse than -$56B projected. For now, the 107.00 still remains a battleground in the pair, albeit one that longs appear to be winning, but to truly become confident that the bottom has been set, the pair will need to close above that figure on a weekly basis.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.