USD/JPY: Non-Farm's Fallout as Panic Sets In
The fallout from Friday’s disappointing US non-farm payrolls has triggered a cascade of bearish momentum in USD/JPY, exacerbated by shifting monetary policies. As the global stock sell-off deepens and panic sets in, we take a closer look at USD/JPY, which stands as a barometer of broader market sentiment.
USD/JPY Under Pressure
USD/JPY has been driven lower by a combination of disappointing US economic data and shifting expectations regarding monetary policy. The latest non-farm payrolls report showed the US economy added just 114,000 jobs in July, significantly below the anticipated 175,000. This weak labour market performance, coupled with an uptick in the unemployment rate to 4.3%, has raised concerns about the resilience of the US economy. Additionally, weak manufacturing data and underwhelming earnings reports have further dampened investor sentiment, leading to increased selling pressure on the US Dollar.
Simultaneously, the Bank of Japan's (BoJ) recent policy shift has provided support for the Japanese Yen. The BoJ unexpectedly raised interest rates to their highest level in 15 years, signalling a departure from its long-standing policy of monetary easing. This move has led to a strengthening of the Yen. The combination of weak US economic indicators and the BoJ's hawkish stance has intensified the bearish momentum behind USD/JPY, driving it lower as traders reassess the outlook for both economies.
Technical Analysis: USD/JPY’s Bearish Momentum
USD/JPY has fallen more than 12% from its July highs, slicing through its 200-day moving average. The sell-off has been characterised by a series of steepening price bars, indicating a sharp increase in bearish momentum. The pair is now testing the volume-weighted average price (VWAP) anchored to the 2023 lows. This anchored VWAP level is significant as it reflects the average price paid by traders during the last major bull run.
Just below the anchored VWAP is a key level of horizontal support formed by the December 2023 swing lows. This area is likely to attract attention from traders as it represents a historical level of buying interest. It is also worth noting that the Relative Strength Index (RSI) has moved deep into oversold territory but has yet to show any signs of divergence. This suggests that while the pair is heavily sold, there is no immediate indication of a reversal, and the bearish momentum may continue in the near term.
USD/JPY Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
USD/JPY Under Pressure
USD/JPY has been driven lower by a combination of disappointing US economic data and shifting expectations regarding monetary policy. The latest non-farm payrolls report showed the US economy added just 114,000 jobs in July, significantly below the anticipated 175,000. This weak labour market performance, coupled with an uptick in the unemployment rate to 4.3%, has raised concerns about the resilience of the US economy. Additionally, weak manufacturing data and underwhelming earnings reports have further dampened investor sentiment, leading to increased selling pressure on the US Dollar.
Simultaneously, the Bank of Japan's (BoJ) recent policy shift has provided support for the Japanese Yen. The BoJ unexpectedly raised interest rates to their highest level in 15 years, signalling a departure from its long-standing policy of monetary easing. This move has led to a strengthening of the Yen. The combination of weak US economic indicators and the BoJ's hawkish stance has intensified the bearish momentum behind USD/JPY, driving it lower as traders reassess the outlook for both economies.
Technical Analysis: USD/JPY’s Bearish Momentum
USD/JPY has fallen more than 12% from its July highs, slicing through its 200-day moving average. The sell-off has been characterised by a series of steepening price bars, indicating a sharp increase in bearish momentum. The pair is now testing the volume-weighted average price (VWAP) anchored to the 2023 lows. This anchored VWAP level is significant as it reflects the average price paid by traders during the last major bull run.
Just below the anchored VWAP is a key level of horizontal support formed by the December 2023 swing lows. This area is likely to attract attention from traders as it represents a historical level of buying interest. It is also worth noting that the Relative Strength Index (RSI) has moved deep into oversold territory but has yet to show any signs of divergence. This suggests that while the pair is heavily sold, there is no immediate indication of a reversal, and the bearish momentum may continue in the near term.
USD/JPY Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
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