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USDJPY Under Renewed Pressure As NFP Approaches

FOREX
  • Daily adjustments for G10 currencies on Friday are understandably small given the close proximity to the key US employment report for May. However, there was some renewed USDJPY weakness in early European trade, which saw the pair print as low as 155.12 from its overnight peak of 155.94.
  • With US yields consolidating at the week’s lowest levels heading into the data, there are clear two-way risks for the Japanese Yen, which remains the most sensitive to key US releases.
  • The pair sits around 0.15% lower and it’s important to note that the key support zone, between 154.76, the 50-day EMA, and 154.17, a trendline drawn from the Dec 28 low, remains in place. A clear break of this key zone would be bearish and highlight a stronger reversal.
  • Elsewhere, reserves data revealed a flatlining in China's gold holdings in May, bringing an end to an 18-month run of buying from the Chinese authorities. This has prompted a sharp $30 move lower for the yellow metal, and in turn supported a modest pull higher for the greenback.
  • This briefly saw the likes of EURUSD, GBPUSD and AUDUSD all pull to the lowest levels of the session, however, ranges remain much more narrow for these pairs.
  • ECB commentary reiterating the board’s intended cautious approach following yesterday’s hike could leave EURUSD topside vulnerable to an in line or weak NFP print today. Above here, the week’s high of 1.0916 precedes the more significant Fibonacci retracement at 1.0933, before 1.0964/81, the March highs.
  • In emerging markets, USDMXN extended a sharp rally from late Thursday, briefly trading above the 18.00 handle once more. Headlines surrounding discussions on potential constitutional reforms continue to spook investors following Sunday’s election results.
  • All focus on US employment data to finish off the week, with Canadian jobs data also crossing.
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