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USD/JPY remains under pressure ahead of crucial nonfarm payrolls

  • The Nikkei is making for a risk-off tone into the closing session as Japanese traders come back from holiday and markets reopen in Tokyo.
  • USD/JPY was flat into the close in European and North America markets in the consolidation of the flash crash that occurred in yesterday's early Asian session, taking USD/JPY down to test the waters of the 105 handle. 

Bulls took back the baton all the way up to the 108 handle, but it was a rough ride with speed bumps along the way within a wide choppy range. US stock prices were also bumpy making for uneven grounds for the US dollar and attracting safe haven flows into the yen. Adding to the pressures were pood data results for the US economy and much softer treasury yields. The yield on the benchmark 10-year note dropping to 2.56%, its lowest in almost a year. 

Looking ahead

  • Non-Farm Payrolls Preview: Is the equity gloom on the US economy warranted?

"We still expect the pair to trade with a heavy tone on the basis that equity repatriation will continue by the domestic investor base," analysts at TD Securities explained, adding, "We expect this to remain a feature in the coming weeks as Japanese FY-end comes into view and capital preservation will become a motivating factor. We turn more tactical and favor a sell-on-rallies posture for USDJPY, with 108.70 acting as a notable resistance marker. On the downside, we expect 105 to act as formidable support."

USD/JPY levels

Meanwhile, the pair has opened the channels for a run down to 104.56 as the 2018 low. "While near-term rallies are contained by the 111.38 26th October low, it will remain directly offered. Initial resistance lies at the 108.12 May 29 low and the mid- February high at 107.91. Together with the accelerated downtrend at 109.98," analysts at Commerzbank argued. 

Meanwhile, Valeria Bednarik, Chief Analyst at FXStreet explained that the short-term looks bearish according to readings in the 4 hours chart:

"It´s developing well below bearish 100 and 200 SMA, while technical indicators resumed their declines in negative territory and after correcting extreme oversold conditions. The pair is trading roughly 100 pips above a key support level, 106.75, as the pair bounced from the level a couple of times after the initial crash."

Support levels: 107.50 107.20 106.75  

Resistance levels: 108.00 108.30 108.60

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