USD/JPY: Gradual pick-up in risk-off sentiment signals return of 111.40/30
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USD/JPY: Gradual pick-up in risk-off sentiment signals return of 111.40/30

  • USD/JPY trades little weak at 111.70 during early Thursday.
  • Signals favoring US employment and pessimism surrounding ECB/Brexit favor the latest pick-up in risk-off sentiment.
  • 100-day and 200-day confluence region of 111.40-30 can act as strong support with 112.15-20 being immediate resistance.

USD/JPY is a touch lower to 111.70 before London markets open on Thursday. The pair seems caught in a gradual selling pressure after soft US data, lack of details on US-China trade deal and pessimism surrounding Brexit continue favoring risk-off sentiment. However, traders await European Central Bank (ECB) meeting results and the US employment details to determine near-term market direction.

On Wednesday, the US ADP employment change, an early signal for Friday’s headline employment details, slipped beneath market forecast of 189K to 183K during February month.
Latest signals from the trade negotiations between the US and China also refrained from giving additional details except for the US President Donald Trump’s one more appreciating remark that the talks are going well.

Brexit continues to loom with no major positives. The EU-UK leaders’ meet in Brussels ended up without any conclusion as both the sides couldn’t agree over Irish backstop. At home, the British politicians seem set to reject the UK PM Theresa May’s second proposal on March 12 whereas EU leaders remain pessimistic over break-though in talks.

The late-afternoon monetary policy meeting by the ECB has off-late been awaited to confirm further bearish bias for the Euro (EUR). A slew of disappointing data from Eurozone and Germany, coupled with hanging Brexit, continue to push the central bank President Mario Draghi to accept weakness in the regional economy and drop his wish to announce Fed-like rate-hike before he leaves the ECB. It should also be noted that no rate change is expected to take place but traders may await calls for TLTRO extension or a bit cautious forward guidance.

For Friday’s US employment details for February, Nonfarm Payrolls (NFP) could slip to 180K from 304K whereas unemployment rate might weaken to 3.9% from 4.0%. Also, average hourly earnings (YoY) may strength to 3.3% from 3.2%.

USD/JPY Technical Analysis

Failure to surpass 112.15-20 seems to drag the quote towards 100-day and 200-day simple moving average (SMA) confluence around 111.40-30 whereas 111.00 and 110.80 could please sellers then after.

On the upside clearance of 112.20 need to validate the strength by crossing 112.30 in order to aim for 113.10.

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