Potential USD/JPY trade

While the rest of the world seems to be enduring an endless wall of worry, the US continues to power ahead as Friday’s GDP drove further USD gains.

USD/JPY
Source: Bloomberg

On balance, Fed members were more hawkish last week and it’s clear a lift off in rates will largely be data-dependant. As a result, this week’s non-farm payrolls data will carry significant weight and go a long way towards shaping rate hike expectations.

After a slump the previous month, non-farm payrolls (NFP) are expected to bounce back strongly with a reading north of 200,000. On Wednesday, we have the ADP non-farm payrolls reading and Thursday brings unemployment claims. There are also a few members speaking, including Lockhart, Bullard and Evans.

There’s potential for the greenback to extend its gains, particularly against the yen, after printing a fresh seven-year high on Friday. USD/JPY has been in a screaming uptrend since mid-August and remains within striking distance of Friday’s six-year high of ¥109.54.

While the pair has retreated a touch in Asian trade, I feel any pullbacks will be used as an opportunity to buy. For aggressive traders, a break above Friday’s high of ¥109.54 could result in further near-term gains. Stops will have to be placed below the ¥108.50 region, which was support over the past couple of weeks.

USD/JPY
Click to enlarge

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.