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USDJPY Price Outlook: US Dollar Strength Driving USDJPY to Multi-Week Highs

USDJPY Price Outlook: US Dollar Strength Driving USDJPY to Multi-Week Highs

Nick Cawley, Strategist

USDJPY Analysis, Price and Chart

  • Ongoing US dollar strength driving USDJPY higher.
  • US Labor Report may fuel further gains.
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JPY Forecast
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The US dollar has been on the rise this year as traders look to the US economy to outperform prior growth expectations. Yields on longer-dated US Treasuries continue to move higher as inflation expectations grow, while the successful implementation of the US covid-19 vaccination program underpins the belief that the US has seen the worst of the pandemic and that the economy may grow faster than official expectations - the FOMC’s median growth expectation for 2021 is 4.2%. Today’s US jobs report (NFPs) at 13:30 GMT is expected to show 50k jobs added in January, compared to 140k jobs lost in December, and while the unemployment rate is expected to remain at 6.7%, this is still sharply below the 14.8% seen in April last year.

NFP and Forex: What is NFP and How to Trade it?

The daily USDJPY price chart shows the turnaround in the pair since the start of the year. The double bottom made on January 5/6 prompted the pair to turn higher, much to the delight of the Bank of Japan who was starting to make noises about the strength of the Yen. The recent acceleration higher was aided by the 20- and 50-day simple moving averages crossing over, while yesterday’s break above, and today’s open above, the 200-day sma is another positive chart signal. Above here a series of old lower highs offer reference points all the way back to 108.16. Above here, progress may slow and plenty of work will need to done before 110 hooves into view.

USDJPYDaily Price Chart (March 2020 – February 5, 2021)

USD/JPY Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 8% 3% 4%
Weekly -2% 1% 0%
What does it mean for price action?
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IG retail positioning data show 48.54% of traders are net-long with the ratio of traders short to long at 1.06 to 1.The number of traders net-long is 12.89% lower than yesterday and 0.23% higher from last week, while the number of traders net-short is 5.28% higher than yesterday and 17.56% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias.

What is your view on USDJPY – are you bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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