The streak of 200K plus job growth in the U.S. was snapped with biggest miss since the beginning of the year. The first reading of the August payrolls came in at 142,000, lower than the forecast of 226,000 and well off the revised 212,000 reading for the month of July.
Prior to the release overnight price action on USD/JPY formed a potential double-top pattern when price made a high of 105.69. The selloff accelerated with the massive jobs miss, but expectations are still fairly strong that this number will have a possible positive revision and that the Fed will not change their outlook that economy is improving. Unemployment rate also fell, but that was mainly because of fall among teenagers. Long-term unemployed improved as well.
The daily chart above shows that the uptrend has found temporary resistance from the double-top pattern. The short-term outlook for this pair might be for a little more weakness, but the fundamentals still support a higher USD/JPY. Immediate support may come from the 104.45 area and major support may rest at the 102 handle. To the upside 106 will remain difficult to break unless we see U.S. yields surge next week. The end of year forecast still remains at around the 110 region.
The trade: Buy USD/JPY at 104.50 with a stop loss at 103.95 and a take profit at 105.95. The Risk/Reward Ratio is almost 1:3
Edward J. Moya
WorldWideMarkets Online Trading