USDJPY & GBPUSD - Destined For More Losses Ahead of Big Events? | DZHI - DZH International 

USDJPY & GBPUSD - Destined For More Losses Ahead of Big Events?

  • Kathy Lien
  • 7 May 2020

USDJPY & GBPUSD - Destined For More Losses Ahead of Big Events?


Daily FX Market Roundup May 6, 2020


As we close in on Friday’s non-farm payrolls report, investors are growing nervous. Stocks ended the day in negative territory after rallying more than 100 points. The US dollar extended its slide against the Japanese Yen for the fourth day in a row but safe haven demand drove the greenback higher against other major currencies.  Sterling was hit the hardest which is no surprise considering that the Bank of England is expected to release lower economic projections on Thursday. Next to the Yen, the Australian dollar was the most resilient thanks to a larger increase in retail sales.


According to ADP, US companies cut more than -20 million jobs in the month of April.Non-farm payrolls are expected to fall by -21M but the outcome could be much worse because this report does not include government payrolls. ADP also under reported increases and declines NFPs in each of the last 6 months. We have been looking for USD/JPY to slip to 106 ahead of the report but with everyone anticipating massive job losses it will be interesting to see exactly how much currencies will respond the day of the release. The Federal Reserve and the White House have warned that the unemployment rate could hit 10% but the fact that the Dow Jones Industrial Average is hovering near 2 month highs tells us that their warnings have either fallen on deaf ears or investors are looking past this month’s weakness to the recovery ahead. Jobless claims are scheduled for release tomorrow – claims in excess of 3.8 million will send USD/JPY tumbling lower. 


While our eyes will always be on the greenback, the main focus on Thursday should be the Bank of England’s monetary policy announcement and Quarterly Inflation Report. After lowering interest rates twice in reaction to COVID-19 and launching a bond buying program, the central bank is widely expected to leave interest rates and QE unchanged. This means the focus will be on their Quarterly Inflation Report. The central bank is widely expected to warn that the economic damage has been significant but instead of publishing forecasts, they are expected to lay out various scenarios for growth and inflation depending on the length of the lockdown. This is a strategy used by the ECB who said the EZ economy could shrink between 5-12% this year. There won’t be a press conference either, instead it has been replaced with an embargoed call with journalists.  There’s very little doubt that they will need to increase the size of their QE program later this year and how sterling trades will depend on how upfront Governor Andrew Bailey is about their plans for more easing. Meanwhile the UK government prepares to drop it stay at home message on Monday which is controversial considering that the number of deaths in UK just exceeded Italy. 


The commodity currencies will also be on the move with Australia’s service sector PMI report scheduled for release along with Canada’s IVEY PMI numbers and China’s trade balance. Chinese data shouldn’t be that market moving because they’ve limited their data deterioration. Australian and Canadian numbers on the other hand could be quite ugly. The Canadian dollar has fallen harder than the Australian dollar with oil prices resuming its slide. A$ was supported by increases in monthly and quarterly retail sales but service sector activity is expected to contract further. The New Zealand dollar sold off harder than A$ even though labor market numbers weren’t terrible. New Zealand reported job gains in the first quarter (against expectations for decline) along with a smaller than expected increase in the unemployment rate.




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About the Author
Kathy Lien
Kathy Lien is Managing Director and Founding Partner of BKForex. Having graduated New York University’s Stern School of Business at the age of 18, Ms. Kathy Lien has more than 13 years of experience in the financial markets with a specific focus on currencies

Ms. Kathy Lien is Managing Director of FX Strategy for BK Asset Management and Co-Founder of Her career started at JPMorgan Chase where she worked on the interbank FX trading desk making markets in foreign exchange and later in the cross markets proprietary trading group where she traded FX spot, options, interest rate derivatives, bonds, equities, and futures.

In 2003, Kathy joined FXCM and started, a leading online foreign exchange research portal. As Chief Strategist, she managed a team of analysts dedicated to providing research and commentary on the foreign exchange market.

In 2008, Kathy joined Global Futures & Forex Ltd as Director of Currency Research where she provided research and analysis to clients and managed a global foreign exchange analysis team. As an expert on G20 currencies, Kathy is often quoted in the Wall Street Journal, Reuters, Bloomberg, Marketwatch, Associated Press, AAP, UK Telegraph, Sydney Morning Herald and other leading news publications.

She also appears regularly on CNBC’s US, Asia and Europe and on Sky Business. Kathy is an internationally published author of the bestselling book Day Trading and Swing Trading the Currency Market as well as The Little Book of Currency Trading and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game all published through Wiley. Kathy’s extensive experience in developing trading strategies using cross markets analysis and her edge in predicting economic surprises serve key components of BK’s analytic techniques.