08-Jan-2021

1) USD/JPY: Dollar Keeps Strengthening Ahead Of the NFP Release
2) GBP/JPY: Finds Traction to Preserve Advances
3) EUR/USD: Bears Attacking Critical Support, Nonfarm Payrolls Trigger a Bounce

1) USD/JPY: Dollar Keeps Strengthening Ahead Of the NFP Release

The USD/JPY pair reached a fresh weekly high of 104.08 this Friday, as the greenback remains on the winning side. Demand for the American currency surged mid-week, amid hopes things will start falling into place this year. Coronavirus immunization through different vaccines lifts odds for an economic comeback in the second semester of the year, while unprecedented monetary stimulus has chances of being increased. Finally, and after some turmoil in the US, President Donald Trump announced an upcoming “orderly transition” on January 20.

The dollar demand, however, is uneven across the board, ahead of US employment data. The country will publish its Nonfarm Payrolls report, expected to show that 71K new jobs were added in December. The unemployment rate is foreseen at 6.8% from 6.7% in the previous month. Meanwhile, US Treasury yields maintain their ascendant trend, reaching levels last seen before the pandemic unwound back in March 2020.

The USD/JPY pair is trading around 103.80, retreating from the mentioned high. Nevertheless, the 4-hour chart indicates that the bearish potential is quite limited. The pair keeps developing above all of its moving averages, while technical indicators are barely retreating from overbought territory. A major resistance area is located in the 104.50 price zone, a descendant trend line coming from March 2020 high. Bulls will have a case if the pair manages to close a day above it.

2) GBP/JPY: Finds Traction to Preserve Advances

GBP/JPY is confronting the resistance belt of 141.20-141.42 after once again finding strong footing off the mid-Bollinger band. The mild inclines in the 100- and 200-day simple moving averages (SMAs) are safeguarding the improving structure, while the upturn in the 50-day SMA is endorsing near-term positive price action.

The short-term oscillators are conveying developments in positive sentiment, backing the upwards creeping tone. The MACD is increasing slightly above its horizontal red trigger line in the positive region, while the RSI is climbing in bullish territory. Furthermore, the positive overlap of the stochastic %D line by the %K line is reflecting the price’s strengthening demeanor.

As things stand, immediate resistance stems from the critical resistance belt of 141.20-141.42. If the bulls manage this time to thrust above the upper Bollinger band encapsulated in this zone, the price could receive the necessary boost to revisit the six-month peak of 142.70. Maintaining a steady hike over this key top, the price could then target the 143.71 significant borders.

In a negative scenario, sellers may encounter initial support from the mid-Bollinger band at 139.71 and the neighboring 139.46 low. Withdrawing below this, a tough zone from the 50-day SMA at 138.80 until the 100-day SMA at 138.00 could attempt to dismiss additional deterioration in the pair. However, should the pair slide further, the bears may turn their focus towards the support band of 136.77-136.95.

3) EUR/USD: Bears Attacking Critical Support, Nonfarm Payrolls Trigger a Bounce

Is King Dollar reclaiming its throne? The greenback has been extending its comeback, buoyed by rising bond yields. Democrats’ win in Georgia gives President-elect Joe Biden’s party control of the Senate – and a path to vast expenditure.

The new administration may opt for a stimulus package worth as much as $3 trillion, including considerable infrastructure spending on top of pandemic-relief measures. Prospects of more government debt push investors away from Treasuries, with the ten-year yield floating around 1.1%. In turn, that makes the dollar more attractive.

Markets are looking to the medium term and continue shrugging off the historic raid of the Capitol by President Donald Trump supporters. In the short term, cabinet resignations and growing Democratic calls for his impeachment are dramatic, but an early departure – with only 12 days to go – makes little difference to Wall Street.

The focus shifts to the King of economic indicators – US Nonfarm Payrolls. The economic calendar is pointing to an increase of fewer than 100,000 jobs in December, a considerable slowdown, and a result of the winter wave of the virus. Leading indicators toward the event were mixed. One worrying statistic was ADP’s private-sector labor report, which showed a loss of 123,000 jobs.

If the official figures also show a squeeze in hiring, the dollar could drop on expectations of more stimulus from the central bank. Jerome Powell, Chairman of the Federal Reserve, speaks next week and may provide hints toward the upcoming Fed meeting later this month.

Do vaccines work against the new variants? Pfizer said that the solution is developed with BioNTech is efficient against the more sophisticated South African strain, cheering investors. On the other hand, British scientists and also politicians cast doubts about it – and more data is needed. Ursula von der Leyen, President of the European Commission, announced the EU secured more doses of the vaccine.

In the meantime, Germany reported a record daily death toll, and hospitals across the continent continue struggling. Admissions are above 130,000 in the US and mortalities surpassed the grim mark of 4,000 on Thursday.

Overall, the battle between the vaccine and the virus continues, and so does the fight over US yields – which is critical for the dollar and the next moves in euro/dollar.

Momentum on the four-hour chart has flipped downward while EUR/USD is still battling the 100 Simple Moving Average. It is trading below the 50 SMA but above the 200 one.

All in all, bears are gaining ground but are far from full control.

Critical support awaits at 1.2205, which is closing level on the last day of 2020. A breach of that level opens the door to 1.2175, 1.2150, and 1.2150, all stepping stones on the way up last month.

Resistance is at 1.2275, which capped the pair in mid-December, followed by 1.2310, a former double top, and then by 1.2350 – 2021 high.