USD/JPY bulls struggle at 111.50 opens the door for bears attack to 111.00

  • The downbeat market sentiment triggers a flight to safe-haven assets, boosting the yen.
  • US T-bond, 10-year yield, clings to the 1.50% threshold.
  • US ADP Employment Change reading was better than expected, increases the prospects of bond tapering.

The USD/JPY is retreating from two-day tops, is down 0.20%, trading at 111.24 during the New York session at the time of writing. 

The market sentiment is downbeat, triggered by rising energy prices, which increase the prospects of high inflation, as seen by upward pressure in bond yields worldwide. Higher yields do their part, hurting company earnings, spurring the sell-off in the US equity markets, with the leading stock indices losing between 0.14% and 1.50%.

The US 10-year Treasury yield is barely down two basis points, bracing to the 1.50% threshold, whereas the greenback is advancing 0.38%, currently at 94.36, failing to boost the USD/JPY, which usually follows the US T-bond yield price action.

US ADP Employment Change smashed expectations

In the US economic docket, the ADP Employment Change for September increase to 568K, better than the 428K  foreseen by analysts. According to Nela Richardson, chief economist at ADP, the labor market recovery is progressing despite a slowdown from the 748K job pace in Q2. Further, she added that labor shortages should fade as health conditions tied to the COVID-19 variant improve.

That said, the report is good news for the Federal Reserve Chair Jerome Powell prospects of QE’s reduction for the beginning of the following year. Nevertheless, on Thursday, the Initial Jobless Claims would provide additional clues to the good-looking ADP report, in anticipation of the Nonfarm Payrolls, to be released on Friday.

USD/JPY Price Forecast: Technical outlook

In the daily chart, USD/JPY broke beneath 111.50, left that level as the first resistance for the pair. However, the daily moving averages (DMA’s), still below the spot price, supporting the upside bias.

For buyers to resume the attack to 112.00 and beyond, they would need a daily close above 111.50. in case of that outcome, the next supply zone would be 112.00.

On the other hand, the first support level is 111.00. If USD/JPY sellers would like to regain control, they need a daily close below 111.00. Once that has been achieved, the following demand zones would be the September 8 high at 110.42, followed by 110.00

The Relative Strength Index (RSI) is at 58, slightly flattish, suggesting that the pair is consolidating before resuming the uptrend.