With no sustainable risk-off hitting the market and staying all in all quite low, a sustainable drop below 108.00 wasn't seen, in fact the USD/JPY is currently trading back above 109.00 and in positive territory for the week.
Whether this will change or not is not only dependent on the developments in regards to the US and Iran, but also dependent on today's Non-Farm Payroll data set which will be published at 1330 GMT .
The consensus for December lies at 164,000, after NFPs increased by 266,000 in November 2019. Main driver for the solid print in December was certainly the strong number from the manufacturing sector, reflecting the return of workers from a GM strike. But given the latest ISM Employment numbers and without striking workers returning, this month's NFPs could likely disappoint.
If so and expectations of market participants of at least one 25 basis point cut in 2020 keep on increasing significantly above 70% (currently and according to the Fed Watch Tool we see a likelihood of ~60%), the USD/JPY could see another drop down to 108.00.
In general, we still consider the USD/JPY an attractive short candidate from a risk-reward perspective midterm.
Technically, the main focus stays on 106.80/107.00, where, from a technical perspective, a break lower could result in a drop as low as 105.00 and probably even lower.
On the other hand: a push above 110 activates 110.70, playing into the cards of USD/JPY bulls, at least short-term.
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