Strong ADP = strong NFP’s and the USD/JPY for a stint above 110.00?

By Admiral Markets

Source: Economic Events February 7, 2020 – Admiral Markets’ Forex Calendar

It’s the first Friday of the month, so forex traders, particularly of the USD/JPY, will watch for the release of the Non-Farm Payrolls with excitement.

This is particularly true after the strong ADP data set last Wednesday, which is usually positively correlated with, and a good indicator of, the NFPs. Here, private businesses in the US hired 291,000 workers in January 2020, the most since May 2015, handily beating market expectations of a 156,000.

With that in mind, today’s NFPs have a solid chance to also beat expectations, and add further fuel to the strong performance of the USD/JPY over the last few days, after the currency pair failed to sustainably break below 108.00.

While the overall technical mode in the USD/JPY stays neutral and choppy, a push above 110.00 brings the region around 110.70 into our focus again, and could potentially be traded on the shorter time-frames.

Still, we remain cautious as to long engagement in the USD/JPY. Because despite solid US economic data over the last few days, expectations among market participants point to the Fed cutting rates by a minimum of 25 basis points in 2020, with a likelihood of around 80% (according to the Fed Watch Tool as of last Thursday).

With that in mind, we think that any bullish moves in the US dollar may be short-lived, and should be cautiously reviewed.

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between November 27, 2018, to February 7, 2020). Accessed: February 7, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of USD/JPY increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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