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.

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.

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