Key Points:
- USDJPY steadies ahead of the US Presidential election result.
- Expect volatility over the next 24 hours.
- Monitor the US Unemployment Claims figures.
The USDJPY experienced a relatively torrid previous week as the US economic data proved disappointing for the most part. In particular, the US Non-Farm Payroll numbers failed to ignite the market at 161k and saw the pair falling sharply. Even a flat Japanese Retail Sales result of -1.9% was unable to arrest the slide and the pair subsequently finished the week at 102.98. Subsequently, given the pair’s current vulnerability it makes sense to take a look at what is potentially on the horizon for the pair.
Last week was highly negative for the USDJPY as the pair faced down the spectre of slipping greenback sentiment and some fairly disappointing US economic data. In particular, the Core Durable Goods Orders and Non-Farm Payroll figures were relatively lacklustre at 0.1%, and 161k respectively. Combined with some US pre-election jitters, the negative data saw a selloff in the USD as capital sought a safe haven and the pair subsequently finished the week down around the 102.98 mark.
The week ahead will largely focus upon the pending Japanese Average Cash Earnings and US Unemployment Claims figures. The JPY Cash Earnings metric is forecast to rise to 0.2% y/y which would be the first positive gain in sometime. In contrast, the US Unemployment Claims figures are likely to stay relatively close to last week’s result and are forecast at 264k. Subsequently, it will largely be the Japanese economic data and potentially the US election result that will determine the pair’s trajectory in the week ahead.
From a technical perspective, the USDJPY’s recent sharp decline seems to suggest that the rebound has completed around the 105.52 mark. Subsequently, our initial bias remains neutral for the week given that any upside recovery is likely to be highly limited. However, watch for a break of 102.53 as this could set the pair up for a challenge of the key 100.00 handle. In addition, it’s likely that we could see some sharp swings around the US election results which may see the yen appear as some sort of temporary “safe haven”. Support is currently in place for the pair at 102.53, 99.92, and 98.98. Resistance exists on the upside at 104.61, 105.53, and 107.47.
Ultimately, the next 24 hours will be critical with the pending US Presidential election and the resultant volatility. Regardless of which candidate wins, expect to see the pair under pressure as the yen becomes viewed as a temporary safe haven. However, once some stability returns to the FX markets post-election result, expect to see the economic divide between the US and Japan to return to impacting the pair’s valuation.