USD/JPY forecast: cup and handle forms ahead of NFP data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 8, 2021
  • The USD/JPY pair rose to 111.90 after Japan’s household spending data.
  • The numbers showed that the country’s spending declined in August.
  • We explain what to expect ahead of NFP data.

The USD/JPY price rose to the highest level since September 30th after the relatively weak Japanese economic data. The pair rose to 111.90, which was about 0.95% above the lowest level this week.

Japan household spending

Household spending is a major component of the Japanese economy. Therefore, investors often pay close attention to the trends in spending.

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Data by the statistics bureau showed that the country’s household spending declined in August. Precisely, spending fell by -3.9% in August after falling by another 0.9% in the previous month. Economists were expecting the data to show that spending fell by 2.0%.

On a year-on-year basis, household spending declined by 3.0% after rising by 0.7%. These numbers show that the country’s spending remained under pressure for several consecutive months. Meanwhile, wages rose from 0.6% to 0.7% while the average cash earnings rose to 0.7%. 

The Japanese economy could rebound after the country’s government removed the state of emergency. It did this after making some progress on vaccinations.

The USD/JPY also rose after the American Senate reached a deal to keep the government funded for at least three months. Senator Mitch McConnel gave Democrats three months to pass a reconciliation bill that will expand the debt ceiling. 

Later today, the pair will react to the latest American non-farm payrolls (NFP) data. The numbers are expected to show that the American economy added more than 500k jobs in September after it added about 235k jobs in the previous month. They expect that wages rose by 4.6% while the unemployment rate declined to 5.1%.

USD/JPY forecast

USD/JPY

The hourly chart shows that the USD/JPY pair declined to a low of 110.86 earlier this week. It then rebounded to a high of 111.90. Along the way, the pair has formed a cup and handle pattern that is usually a bullish sign. It is also being supported by the short and longer-term moving averages. Therefore, the pair will likely keep rising as investors target the next key resistance at 112.0. 

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