- The yen made modest gains on Friday, yet it is set for a weekly decline of over 2.5%.
- Analysts anticipate an increase of 148,000 in US employment figures for September.
- Japan’s Prime Minister Ishiba has dampened expectations for a rate hike in the near future.
The outlook for USD/JPY indicates a pause near recent highs as we await significant US monthly employment reports. The dollar is currently positioned near a six-week peak, supported by a slightly hawkish Federal Reserve, positive economic data, and tensions in the Middle East. Meanwhile, although the yen showed slight strengthening on Friday, it’s on track for a weekly loss exceeding 2.5%.
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Market players are gearing up for the release of US nonfarm payrolls, which will provide insights into Fed policy directions. Consensus estimates suggest an increase of 148,000 jobs for September, with the unemployment rate expected to hold steady at 4.2%. Recent US data has highlighted the economy’s surprising resilience.
If this positive trend persists, the NFP could surpass expectations. A strong report could reduce speculation regarding a 50-bps rate cut. Conversely, a significant drop in employment may compel the Fed to consider another substantial cut in November. Notably, Powell has previously indicated that the Fed might implement two rate cuts this year, each by 25 bps. Employment results could influence this forecast.
In related news, data released on Thursday reflected better-than-expected activity in the services sector, pointing to a robust economy. The dollar has remained near its weekly highs as geopolitical tensions in the Middle East have unsettled traders. The conflict has escalated to engage Iran and Lebanon, with Iran executing a daring strike on Israel, raising fears of potential retaliation.
In Japan, the newly appointed Prime Minister Ishiba has quashed any hopes for an imminent rate hike, stating that the economy is unprepared for further increases. Nevertheless, many economists project at least one rate hike before the year’s end.
Key Events for USD/JPY Today
- US average hourly earnings m/m
- US nonfarm employment change
- US unemployment rate
Technical Outlook for USD/JPY: Rally Stalls at 147.01 Resistance
From a technical perspective, the USD/JPY price has pulled back after encountering significant resistance at the 147.01 mark. Nevertheless, the bullish sentiment remains intact, as the price sits well above the 30-day simple moving average (SMA) and the Relative Strength Index (RSI) stays in bullish territory.
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Furthermore, the price is navigating within a bullish channel with distinct support and resistance levels. Recently, buyers tested the channel’s upper resistance, where sellers were poised to take control. If buyers sustain their momentum, the price could break above the 147.01 resistance; otherwise, it may retreat towards the channel support.
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