USD/JPY Bulls to Target 138 on ADP Nonfarms and JOLTs Job Openings

It is another quiet start to the day for the USD/JPY. This morning current account numbers delivered further Yen weakness as investors responded further to Fed Chair Powell’s hawkish testimony from Tuesday.

The current account balance fell from a ¥0.033 trillion surplus to a ¥1.977 trillion deficit. Economists forecast a deficit of ¥0.818 trillion.

With no other material stats to consider from Japan or the region, investors will likely look ahead to US ADP nonfarm and JOLTs job opening figures due later today. On Tuesday, Fed Chair Powell spoke of the need for higher rates to combat inflation, noting that economic data was better than expected.

A strong ADP report and steady JOLTs job openings would pave the way to a 50-basis point March rate hike and support further USD/JPY gains. Fed Chair Powell delivers a second day of testimony today, with US labor market numbers likely to influence.

With incoming Bank of Japan Governor Kazuo Ueda signaling ultra-loose monetary policy over the near term, monetary policy divergence remains firmly in favor of the dollar.

USD/JPY Price Action

At the time of writing, the USD/JPY was up 0.36% to 137.629. A mixed start to the day saw the USD/JPY fall to an early low of 137.033 before rising to a high of 137.682.

Technical Indicators

The USD/JPY needs to avoid the 136.623 pivot to target the First Major Resistance Level (R1) at 137.709. Avoiding a return to sub-137.500 would signal a bullish USD/JPY session. However, the USD/JPY would need hawkish Fed chatter and solid US labor market numbers to support another breakout.

In case of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at 138.281. The Third Major Resistance Level sits at 139.939.

A fall through the pivot would bring the First Major Support Level (S1) at 136.051 into play. However, barring a data-fueled sell-off, the USD/JPY pair should avoid sub-136 and the Second Major Support Level (S2) at 134.965. The Third Major Support Level (S3) sits at 133.307.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The USD/JPY sits above the 50-day EMA (136.001). The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A USD/JPY hold above the 50-day EMA (136.001) would support a breakout from R1 (137.709) to target R2 (138.281) and 138.500. However, a fall through S1 (136.051) would give the bears a run at the 50-day EMA ($136.001). A fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a busier day on the US economic calendar. ADP nonfarm employment change numbers for February and the JOLTs Job Openings report for January will be in the spotlight.

Following Fed Chair Powell’s hawkish testimony on Tuesday, a solid set of numbers would support another USD/JPY breakout. However, investors should consider the second day of Powell testimony that will follow the labor market numbers.