US economic data has been soft since December and all eyes will be on today’s ISM Non-Manufacturing Index. Last Friday, the ISM Manufacturing Index came in well below expectations, showing the recession in the manufacturing sector is worse than priced in. Economists expect a rebound in the ISM Non-Manufacturing Index while factory orders are anticipated to post a contraction. How will this influence price action in the USDJPY? Subscribe to the PaxForex Daily Fundamental Analysis and grow your balance trade-by-trade.
Final Japanese services and composite PMI data were revised lower, showing a contraction in both components. This resulted in a minor sell-off in the Japanese Yen, pushing the USDJPY to the upper band of its horizontal resistance area. Safe-haven demand also eased as traders rethink their initial reaction to the spike in tension between the US and Iran. How will today’s US economic data influence this currency pair? Today’s fundamental analysis will take a look at the upside potential as well as the downside risk in this currency pair.
Here are the key factors to keep in mind today for US Dollar trades:
- US Trade Balance: The US Trade Balance for November is predicted at -$43.9B. Forex traders can compare this to the US Trade Balance for October, which was reported at -$47.2B.
- US Factory Orders: US Factory Orders for November are predicted to decrease by 0.7% monthly. Forex traders can compare this to US Factory Orders for October, which increased by 0.3% monthly.
- US ISM Non-Manufacturing PMI: US ISM Non-Manufacturing PMI for December is predicted at 54.5. Forex traders can compare this to the US ISM Non-Manufacturing PMI for November, which was reported at 53.9. The ISM Non-Manufacturing Business Activity Index for December is predicted at 52.0. Forex traders can compare this to the ISM Non-Manufacturing Business Activity Index for November, which was reported at 51.6.
Here are the key factors to keep in mind today for Japanese Yen trades:
- Japanese Loans & Discounts: Japanese Loans & Discounts for November increased by 2.02% annualized. Forex traders can compare this to Japanese Loans & Discounts for October, which increased by 2.24%.
- Japanese Monetary Base and Monetary Base end of Period: The Japanese Monetary Base for December increased by 3.2% annualized and the Monetary Base end of Period was reported at ¥518.2T. Forex traders can compare this to the Japanese Monetary Base for November, which increased by 3.3% annualized and to the Monetary Base end of Period, which was reported at ¥517.3T.
- Japanese Jibun Bank Services PMI and Composite PMI: The Final Japanese Jibun Bank Services PMI for December was reported at 49.4. Forex traders can compare this to the previous Japanese Jibun Bank Services PMI for December, which was reported at 50.6. The Final Japanese Jibun Bank Composite PMI for December was reported at 48.6. Forex traders can compare this to the previous Japanese Jibun Bank Composite PMI for December, which was reported at 49.8.
Should price action for the USDJPY remain inside the or breakdown below the 108.200 to 108.800 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 108.350
- Take Profit Zone: 105.000 – 105.650
- Stop Loss Level: 109.000
Should price action for the USDJPY breakout above 108.800 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 109.000
- Take Profit Zone: 109.900 – 110.650
- Stop Loss Level: 108.350
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