USD/JPY: a mixed bag on another key week ahead, but bulls remain on solid ground

• USD/JPY has started out the week indecisive in thin trading conditions with Tokyo  out followed by the US and Canada away for Columbus and Thanks Giving respectively.
• The pair is currently trading at 113.82 having made a high of 113.86 and a low of 113.69 but the technicals  lean bullish on what is scheduled to be a busy week ahead.

The momentum to the upside has slowed in the last few sessions  despite US yields sky-rocketing and US data outperforming. The pair topped out around the 114.50’s, dropped to a technical support line in the 113.60’s where bulls recovered some lost ground for a short-lived spell back on the 114 handle where supply took the pair back down below the hourly H7S neckline only to find demand  in the 113.60s again. The pair has stabilised  there despite a sea of red in the stock markets. The dollar was mixed but solid enough to keep the bears at bay and the same can be said for the nonfarm payrolls data.  

The jobs data was a disappointment on the headline, (134k, 185k forecast, 201k prev, 270k revised), although  wages and the unemployment rate ignited rate hike fever which made for  choppy price action and a game of tug and war between the bears and bulls in the markets – (US September Average Earnings m/m, 0.3%, 0.3% forecast, 0.4% previous, 0.3% revised – US Sep Average Earnings y/y, 2.8%, 2.8% forecast, 2.9% previous).   As for the US Sep Unemployment rate, at 3.7%, vs 3.8% forecast, and 3.9% previous, this leaves eight years of job gains, and unemployment at the lowest since 1969.  

Fed chat keeps the dollar bid ahead of another key week

Powell and Bostic were both reinforcing the case for more hikes on Friday ahead of a week that holds plenty of potential risk-off events with respect to geopolitics  that may or may not continue to solely favour the greenback in the short term – US CPI will be the highlight.

The week ahead: a potential rollercoaster week ahead – Nomura

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that technically, the pair remains in bullish ground according to the daily chart:

“It keeps developing below its moving averages, with the 100 DMA heading north over 200 pips below the current level. Technical indicators in the mentioned chart have retreated from overbought readings, maintaining downward slopes but far above their midlines, leaving doors open for further slides ahead. In the 4 hours chart, the pair is trading above firmly bullish 100 and 200 SMA, while technical indicators entered in negative ground with strong downward slopes, in line with the longer-term perspective.”

Meanwhile, the double top highs and R1 that are located at 114.40/50 remains compelling. Beyond there, we have the  Fibo targets as being the August, September lows as well as 61.8% of 2016-18 drop at 115.08/15/33. On the flip side, S2 is located at 112.63. There is a  confluence of the 38.2% Fibo of Aug lows-recent highs which may prove to be a strong level of support.