USD/JPY plummeted after a horrible non-farm payroll report showed that only 126,000 jobs were added last month. The worst monthly print since December 2013 also brought down the 3-month average to 197,000 from 260,000 in 2014. The Unemployment rate remained at 5.5%, but the participation rate declined to the February 1978 level of 62.7%. 277k people dropped out of the labor force.
Price action on the USD/JPY daily chart shows significant selloff that occurred on this thin trading session. Since forming a double-top pattern on March 10th, price has steadily weakened towards both the 50- and 100-day Simple Moving Averages (SMA). If we continue to see weakness early next week, we may see further downward momentum target the 117.00 handle.
While a June rate hike may be off the table, a September one still may occur. As long as we see a steady decline (not a long bodied candle) towards the 117.00 level, a bullish Gartley pattern may form and signal and ideal buying entry level. Point D is targeted with both the 78.6% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci Expansion level of the B to C rally.
The bullish trend may need one last major drop before re-establishing itself. Further upside may eventually target the 125.region later this year.
The trade: Buy USD/JPY 117.10, with a stop loss at 116.10 and take profit at 120.60. The risk/reward ratio is around 1: 3.5
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading