Is USD/JPY Bound For A Downside Correction? Eyeing The American Consumer

  • USD/JPY’s advance has reversed amid trade headlines and mixed US data.
  • Mid-East tensions, trade developments, and US consumer data are all of interest.
  • Early January’s chart is painting a moderately bullish picture. 
  • The FX Poll is showing that experts are divided on the next moves.

Walking the walk or only talking the talk? Mid-East tensions have been dominant as Iran hit back at the US, but the outright war still has low chances. USD/JPY benefited from upbeat US figures and calm on the trade front. The same themes are likely to continue rocking the currency pair – albeit in a different order.

This week in USD/JPY: Mid-East tensions dominate trading

Iraq has remained the scene of the Mid-East tensions, with Iran hitting US bases with missiles. The attack – coming as retaliation for the American killing of Iran’s Qassem Suleimani – seemed to inflict limited damage. That allowed markets to calm and USD/JPY to advance. President Donald Trump’s message – that included no new military intentions and even an olive branch – further boosted the pair.

The greenback was been buoyed by upbeat data during most of the week. Contrary to the manufacturing sector, the ISM Non-Manufacturing Purchasing Managers’ Index beat expected and reflected the health of the US consumer. The ADP employment report also exceeded estimates.

However, Non-Farm Payrolls missed expectations with an increase of only 145,000 jobs in December, below 164,000 expected and even higher projections following the ADP data. Moreover, wage growth decelerated from 3.1% to 2.9%.

Trade talks – which had a substantial impact on trading in 2019 – were pushed to the back burner in the first full week of 2020. China confirmed that Vice Premier Liu He will be traveling to Washington to sign the Phase One trade deal.

US events: Trade signing ceremony, retail sales and more

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Disclaimer: Foreign exchange (Forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher. Investment objectives, risk appetite and ...

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