USD/JPY Technical: Countertrend USD rebound remains intact ahead of US NFP

  • The US dollar is the top performer against the JPY on a 5-day rolling basis (+3%).
  • A monthly US NFP jobs gain of between +240K to +260K may ignite another bout of US dollar rally.
  • Bullish momentum is supporting a potential extension of the ongoing countertrend rebound in USD/JPY.
  • Watch the next intermediate resistance at 146.70/147.45

This is a follow-up analysis of our prior report, “USD/JPY Technical: Potential countertrend USD corrective rebound on the horizon” published on 2 January 2023. Click here for a recap.

The USD/JPY has staged the expected countertrend corrective rebound from its 5-month low of 140.25 printed on 28 December 2023. It has rallied by +470 pips/+3.35% to hit a current intraday high of 145.37 today, 5 January Asian session at this time of the writing (see Fig 1).

Revival of short-term US dollar strength

So far, the US dollar has been on a bullish beat since the start of the new year and the USD/JPY is the top performer with a rolling 5-day return of +3% over the USD/AUD (+1.7%), USD/CHF (+1.2%), USD/EUR (+1%), and USD/GBP (+0.5%) ahead of today’s US non-farm payrolls (NFP) jobs data release where the consensus has pencilled in a lower number of +170K jobs added for December 2023 over the prior November’s print of +199K.

The persistent US dollar weakness seen throughout Q4 2023 has been driven by rising expectations on the US Federal Reserve’s dovish pivot to kick start its accommodating monetary policy in 2024 with six cuts on its Fed funds rate being priced in by the interest rate futures market according to the CME FedWatch tool.

+240K to +260K for December NFP may ignite further US dollar strength

Hence, if today’s NFP number shows a higher number of jobs added in December in a range of +240K to +260K that is above the prior 12 months’ average of around +240K monthly gain, the current dovish optimism on the Fed to enact the expected six interest rates cuts is likely to be tapered downwards as the US job market is not in the doldrums which in turn may see a continuation of the current bout of US dollar strength.

Bullish momentum remains intact

Fig 2: USD/JPY medium-term trend as of 5 Jan 2024 (Source: TradingView, click to enlarge chart)

Fig 3: USD/JPY short-term minor trend as of 5 Jan 2023 (Source: TradingView, click to enlarge chart

The prior three-day rally seen in the USD/JPY is not showing any clear signs of fatigue as its price actions have just surpassed the 20 and 200-day moving averages.

In addition, the hourly RSI momentum indicator has continued to trace out a series of “higher lows” above the 50 level which suggests short-term upside momentum remains intact.

If the 143.75 key short-term pivotal support manages to hold, the USD/JPY may continue its current countertrend corrective rebound leg to see the next intermediate resistances coming in at 146.70 and 147.45 (also the downward sloping 50-day moving average & 61.8% Fibonacci retracement of the medium-term downtrend from 13 November 2023 high to 28 December 2023 low).

However, failure to hold at 143.75 negates the bullish tone to expose the next intermediate support at 142.20 in the first step.

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Kelvin Wong

Kelvin Wong

Senior Market Analyst, OANDA at OANDA
Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities. Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets. In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.