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USD/JPY Set to Violate Upward Channel - Quick Trade Plan


The USD/JPY pair was closed at 106.227 after placing a high of 106.503 and 106.055. Overall the movement of the USD/JPY pair remained bullish throughout the day. The USD/JPY pair extended its gains for the 5th day and rose on Friday on the back of strong US dollar after positive US Non-Farm Employment data.

On Friday, investors' focus was on the US non-Farm payroll data that technically remained neutral to the projections but managed to provide strength to the US dollar as other supporting data of jobless rate and average hourly earnings came in positive.

At 17:30 GMT, the Average Hourly Earnings from the US on August rose to 0.4% from the expected 0.0% and supported the US dollar. The Non-Farm Employment Change came in line with the anticipated 1371K, and the Unemployment Rate from the US stopped in August to 8.4% from the projected 9.8% and supported the greenback.

The strong US dollar due to strong jobs reports raised the hopes for quick economic recovery and helped support the USD/JPY pair's an upward trend. The same data also raised concerns about whether the US Congress will issue another stimulus proposal given the strong job data.

The US Congress has delayed the next US stimulus package as the House has not reached a consensus. Both Democrats and Republicans are still debating the funding for states and schools, unemployment benefits, and the stimulus package's financial outlay.

Republicans have proposed to add $300 billion in their proposed package of $1 trillion, and the Democrats have agreed to decrease their proposed package to $2.2 trillion. But still, both parties are far from reaching a consensus as Nancy Pelosi has said that Democrats will not approve anything less than a $2.2 trillion package.

On the other hand, the US Vice President Mike Pence has said that Donald Trump supported the second round of direct payments to US citizens. The US Secretary of State Steven Mnuchin has said that Donald Trump believed that to jump-start the American economy, a new COVID-19 stimulus package was a must. This raised the risk sentiment as the US Congress is set to open in the coming weeks, and the hopes are rising that the package will be approved soon. This weighed on the safe-haven Japanese Yen and added in the USD/JPY gains.

Furthermore, the tensions between the US & China kept the safe-haven Japanese Yen under demand and capped further gains in the USD/JPY pair. Both countries were taking actions against their media employees that has raised concerns over their trade deal completion. Meanwhile, the pair's upward movement was also supported by the rising number of coronavirus from worldwide as the tensions regarding economic recovery remains.

Daily Technical levels

Support Resistance

106.24 106.35

106.17 106.39

106.13 106.46

Pivot Point: 106.28

The USD/JPY pair is trading at 106.250 level, holding in the upward channel supporting the pair at 106.015. The 50 periods EMA is likely to extend support at 106; however, the bearish breakout of 106.015 level can extend the selling trend until 106.600 and 105.320 level. Conversely, the bullish breakout of the USD/JPY level may buy until 106. Good luck!

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