Market highlights from the last week
Wednesday May 6: US ADP data reported a private-sector employment decline of over 20 million for April
Thursday May 7: President Trump again maintained negative rhetoric against China over the weekend. Markets, however, tended to focus on hopes for economic recovery and China’s central bank stated that it will use more powerful policies to help growth
Friday May 8: US jobs data was horrific, but slightly better than consensus forecasts with non-farm payrolls declining 20.5 million and unemployment rising to 14.7 per cent.
Monday May 11: The dollar was boosted by a significant recovery in US yields during the day.
Tuesday May 12: The dollar lost ground during Tuesday as weak CPI inflation data reinforced expectations of extremely low interest rates
USD/JPY Price Analysis
Let us have a look at the technical viewpoint.
Monthly: March price action posted a range of 1054 pips. This was the largest ranging candle in 39 months. Both March and April closed little net changed, Doji-style candles highlighting indecision.
Weekly: Continued downward momentum from the 109.38 high has resulted in four weeks of net losses. Resistance is seen at 107.93.
Daily: Posted a bullish Outside Day on May 7. This candle often indicates the end of a trend and the start of a new upward bias.
Intraday 4-hour: The 261.8 per cent extension level is located at 107.79. This is just inside the aforementioned resistance at 107.93. This could be seen as the completion of a bullish Elliott wave count (five waves up by three waves down).
A rejection of this level (area) would then offer channel support at 106.85.
Outlook: Although there is scope for a mild move to the upside, rallies should be limited. Selling close to 107.90, targeting 107.00 offers an ample reward against risk setup
Possible trade setup
Action: Selling at 107.90
Potential return on risk to first target: R3 (reward 90/ risk 30)
Risk Warning - Your capital is at risk - Losses can exceed deposits
Trading spot foreign exchange and futures on margin carries a high level of risk and may not be suitable for all investors. You may lose all your capital. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in spot foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. If you are in any doubt about investment or the mechanics of such products, you should seek independent financial advice