USD/JPY has best week since October

• USD/JPY rose on Friday for the third day in a row.
• Extended correction from 4-month lows. 
• Greenback extended gains after NFP. 

The USD/JPY pair rose on Friday and completed three days with gains. The US dollar was the top performer on the last day of the week. It opened the day moving to the upside and accelerated after the release of the US employment report. During the last hours, the bullish tone eased but the US dollar consolidated gains.

A stronger US dollar and rising US bond yields supported the upside in USD/JPY. The negative tone in Wall Street limited the upside. The Dow Jones was falling more than 2.0% while the S&P 500 was down 1.70%. 

US data showed that wages rose in January at the fastest rate since 2009 at 2.9%. NFP came in at 200K above the 180K expected. The unemployment rate remained at 4.1%
“Rising wages and robust economic growth is supportive of our 3% headline inflation call for this summer”, said analysts from ING. According to them, it will need a big shock to prevent the Federal Reserve from raising rates in March, but it could happen in the form of a damaging government shutdown should politicians fail to resolve their differences. The data could bring in the possibility of four rate hikes during 2018. 

USD/JPY rose sharply on the back of the report. It peaked at 110.47, the highest level in a week. It pulled back modestly finding support around 110.00. It was about to end the week hovering around 110.25, posting a weekly gain of 160 pips, the biggest since October. 

Technical levels 

Friday’s rally was capped by the 20-day moving average that stands at 110.40/45. If the greenback manages to rise above, resistance levels lie at and 110.60 and 111.05. If USD/JPY fails to recover above 110.40/50, the negative tone could rise, favoring a move lower. Support levels could be seen at 109.75 (Feb 1 high) and 109.10 (Jan 31 high).