USDJPY Remains Bearish – Post BREXIT

USD/JPY is currently trading at 100.533, and is now only 53 points away from the psychologically important 100.00 level. The US labour market bounced back in June following the disappointment in May, creating 287,000 jobs which was well ahead of market expectations. As always with the jobs report, there is much more to it than the headline numbers would suggest, including the fact that the previous two NFP numbers were both revised, May’s down to a shocking 11,000 and April’s up to 144,000. The important thing to consider here is that across the three months, the average number of jobs created was just over 147,000 which based on the communication from the Fed in recent months is good enough at these levels of unemployment.

When the report was first released, USD/JPY jumped to a high of 101.28 but it reversed quickly hitting a low of 99.99. However the pullback to 100 was short-lived with the currency pair bouncing back to its pre-NFP levels within minutes. Part of this is due to the rise in U.S. stocks and general improvement in risk appetite but 100 is also a very important technical level and it is clear that there were a lot of bids at that rate. Although job growth rebounded strongly in the month of June, the unemployment rate rose more than expected and average hourly earnings growth slowed. While its true that Fed Fund futures have gone from pricing in an 11% chance of tightening in 2016 to 22% chance post payrolls, there's no reasonable case for a rate hike before the end of the year especially since analysts don't expect any of next week's economic reports to provide upside momentum for the dollar.

With two monetary policy announcements, continued Brexit risks, U.S. retail sales, Chinese trade and GDP numbers on the calendar, analysts anticipate another volatile week for the greenback. There may not be a tremendous amount of consistency as the dollar should remain weak versus the yen but strong versus European currencies. The most important piece of U.S. data scheduled for release next week will be U.S. retail sales and between the decline in wage growth, the sharp drop in gas prices in June and lower spending reported by the Johnson Redbook survey, all signs point to lower consumer spending and a more restrained increase in consumer prices.

Technical analysis

When we look at the monthly chart of this pair ( 7 years period) we can see strong " bearish" correction. On this monthly chart I marked support and resistance levels, 105.000 (resistance) and 100.500 (support) levels represent current trading range and breaking above/below this levels would open way to 106.000 (resistance 2) or 100.000 ( psychological support) and than to 97.500.



On this weekly chart we can also see that major trend is "bearish", price has dropped from 125.86 level to 98.99 level. Strong bearish candle (last candle at the end of the chart) shows that there are still no signs of trend reversal. First "BUY" signal would be if the price jumps above 102.000 level, breaking below 100.500 would open way to 100.000 and than to 98.990 level.


On this daily chart we can see that USD/JPY bottomed at 98.999 and after that returned above 100.000 level ( psychological support level). On this daily chart we can see that USD/JPY bottomed at 98.999 and after that returned above 100.000 level ( psychological support level). On this chart I marked short term trendline and as long the price is below this trend line there is no indication of short trend reversal and this pair is in the "sell" zone ( short term trend). On this I marked support and resistance levels, first "BUY" signal would be if the price jumps above 102.000 level, breaking below 100.500 would open way to 100.000 and than to 99.000 level. USD/JPY’s stance remains tilted to the downside as long as it trades below 102.000, the downward pressure is still on the downside, a retest of the post-Brexit low of 99.00 would not be surprising. USD/JPY could test the 100.00 level despite the rebound in jobs as shorts press their advantage, dollar bullish sign would be a strong rise in average weekly earnings which could prompt the Fed to reconsider its inflation expectations.


USD/JPY’s stance remains tilted to the downside, breaking below 100.450 (support on 15 min chart) would open way to 100.000 and than to 98.990 level.