USD/JPY: Bid in Tokyo on Central Bank Divergences

USD/JPY: Bid in Tokyo on Central Bank Divergences

9 May 2016, 02:59
Roberto Jacobs
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USD/JPY: Bid in Tokyo on Central Bank Divergences

USD/JPY is on the up in the Tokyo open with Japan finally back for a full week's work this week. The price is bid at the highest level since the end of April's business at 107.64 the high so far.

The greenback carries on making advances across the board, despite last week's miss in the headline for nonfarm payrolls and negativity in the background of the number. What is compelling is how the market essentially ignored the headline miss, apart from the initial knee-jerk, and did not pay attention to the detail.

Nonfarm payrolls - what's in the detail?

The markets got one of the weakest reports in the last couple of years, with 160k net and a revised March report of 215k-208k. Hourly earnings increased 0.3%, but last month's 0.3% was revised to 0.2%. The participation rate was 63 last, a move up, but in April that came down to 62.8, so 562k people left the labour force during the month of April.

What is alarming is whether part-time and lower paid jobs are being added while top end higher-paid work is being lost. Stocks were down initially, but then rallied on the back of the odds falling to practically zero that the Fed can hike this year, let alone in June. However, the dollar catches a bid on Central Bank differentials still while markets still continue to bet on the Fed raising rates at some stage, or at least on hold short-term while other Banks, such as the RBA, BoJ, are forecasted to cut.

Further reading on divergence US-Japan yield spread


USD/JPY levels

Despite the bid today, Valeria Bednarik explained that the pair maintains a clear negative tone from a technical point of view, "given that in the daily chart, the Momentum indicator heads south well below the 100 level, whilst the RSI indicator has resumed its decline near oversold territory," adding, "Also, the 100 DMA has extended its decline far above the current level while widening the distance with the 200 DMA, indicating bears are still in the driver´s seat."


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