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Feb 07 - 02:36 PM

USD/JPY - COMMENT- USD/JPY Bulls Run Into Offers Above 110, Trend Favors Further Gains

By Paul Spirgel  —  Feb 07 - 12:40 PM

USD/JPY has backed away from the flash high of 110.02 it struck after U.S. non-farm payrolls to current levels around 109.82, but the trend still indicates more gains are on the cards.
The initial bullish dollar reaction to the headline NFP beat gave way to softer tones on the health of the U.S. economy and future Fed action.
But, dollar bulls have had a productive week, with USD/JPY rising from Asia's Monday session low of 108.32 on EBS, after China provided accommodation to counter the economic affects of the coronavirus.
Today's high in Asia, at 110.04, had cleared out option barriers.
Resistance after payrolls at 110.02 hints at USD/JPY being well offered ahead of Jan. 17's 2020 high of 110.31.
However, with the Fed trying to remain on hold, the dollar should be poised to gain broadly -- and against the yen -- once the dust settles from the payrolls report.
Firstly, the coronavirus continues to spread within Asia.
Secondly, though the Fed is likely to remain on hold, weak global growth will shift other developed market central banks to embrace accommodation.
Lastly, JPY spec short positioning, now at -36,025 contracts, has been greatly reduced since May 2019's -99,705, providing ample opportunity to re-initiate JPY shorts.

Refinitiv IFR Research/Market Commentary


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