USD/JPY: bid with risk-on in Tokyo and strong dollar ahead of nonfarm payrolls

Currently, USD/JPY is trading at 114.52, up 0.15% on the day, having posted a daily high at 114.54 and low at 114.29.

USD/JPY is making a minor recovery of the supply from the highs overnight when USD/JPY rallied hard from just below the 114-barrier to 114.75. Supply took the pair back to 114.28 before it stabilised, found traction, and bulls drifted higher into the open. Tokyo is risk-on with most indices opening higher and with Nikkei 225 outperforming. 

The data overnight was a positive prelude to the showdown at the end of the week in the nonfarm payrolls report. The ADP report indicated that nonfarm private employment increased by 298k jobs from January to February, surprising markets to the upside (Nomura: 215k, Consensus: 190k). 

Solid U.S. data and GDP tracker update - Nomura

Should such a report come to fruition, it will be enough to convince the market that the Fed will hike next week although the risks in the report are a further increase in the participation rate equate to another rise in unemployment and the FOMC may forecast that this will equate to lower wages going forward and possible delay the Fed from hiking so soon. This is 'Just a reason or two to short the 'March rate hike herd'

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the pair could now extend its consolidation around current levels ahead of the ECB meeting and the US employment report. 

"The price is hovering around the 23.6% retracement of the late 2016 rally, having been unable to settle above it since late January," she explained, adding, " In the 4 hours chart, the price is well above its moving averages that anyway remain directionless, whilst technical indicators are retreating modestly within positive territory, not enough to suggest an upcoming downward move. At this point, the pair needs to extend beyond 114.95, February 15th high to confirm additional gains ahead."