USD/JPY retreats below 107.00 despite Wall Street rally, consolidates weekly losses
|- Dollar loses momentum across the board, as US yield remains at weekly lows.
- USD/JPY heads for weekly decline, holds a negative bias.
The USD/JPY pair jumped to 107.12 after the release of the US employment report but it failed to hold on top of 107.00 and dropped to 106.80. As of writing trades at 106.90, flat for the day and a hundred pips below the level it had a week ago.
NFP not bad, not very good
September NFP showed that the US economy added 136K jobs below the 145K expected while at the same time the unemployment rate dropped from 3.7% to 3.5%, hitting the lowest in fifty years. The slowdown in wages was a negative factor. “Signs that the economy is losing momentum beyond the factory sector are mounting, but the labor market is not falling off the rails. Employers added 136K new jobs in September, which was below market expectations but strong relative to the dismal readings on hiring in both ISM reports earlier this week,” said Wells Fargo analysts.
The numbers initially boosted the Greenback against G10 currencies but then it lost strength. Emerging market currencies held to gains supported by expectations of Fed rate cuts and also by the improvement in risk sentiment.
The Japanese Yen is posting mix results on Friday but it still among the top performers of the week. The decline in US yields and in equity prices over the week boosted the demand for the Yen that eased on Friday as Wall Street recovers.
Technical outlook
While momentum on the daily chart remains positive, USD/JPY is losing the support of the 50-day Simple Moving Average and has also been rejected at 108.50 – both bearish signs, notes Yohay Elam, analysts at FXStreet.
“All in all, the bias is leaning in favor of the bears. Support awaits at 106.50, which was the low point in early October. Further down, 105.75 was a stepping stone on the way up in September and works as support.” Elam notes that some resistance awaits at 107, which held USD/JPY up in late September and then 107.50, a previous support.
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