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A Drop in Non-Farm Payrolls, Would Support Bullish Yen Technical Outlook

Friday, 05 December 2008 06:03:32 GMT  |  John Rivera, Currency Analyst

The U.S. economy is expected to have given back another 334,000 jobs in November which would bring the total for the year to over 1.5 million. An inline print would equal the largest monthly decline since 1982, surpassing the worst levels following 9/11.

Fundamental Outlook

The U.S. economy is expected to have given back another 334,000 jobs in November which would bring the total for the year to over 1.5 million. An inline print would equal the largest monthly decline since 1982, surpassing the worst levels following 9/11. Employers have cut payrolls every month this year and with the U.S. economy officially in a recession more are expected. The accelerating weakness in the labor market could spark risk aversion and lead to a flight to safety which would sink the USD/JPY. Technical analysis is calling for further declines in the pair which could be initiated by the labor report. However, the labor market is a lagging indicator for the economy and the amount of job losses reaching a crescendo could signal that a bottom has formed. However, until the problems of the Detroit carmakers become resolved and the housing markets starts to turn, traders may remain cautious.

 

Technical Outlook

As long as price remains below 96 (below the resistance line from early October), bearish potential is significant (below 80).  Another reason to stay bearish is that the USDJPY is not ‘acting’ as it has at recent bottoms.  Turns usually occur with a price spike (notice indicator on chart).  There has been no spike recently in the USDJPY, which tells me that a bottom is not likely to form soon.   

 

For More Technical Analysis Visit the Daily Technical Report

 

To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com

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