Originally published by VT Markets.
Title: USD/JPY Edges Higher Near 156.50 Amid Focus on US Jobs Report
During the European trading session, the USD/JPY currency pair sees moderate upward movement, climbing closer to the 156.50 mark. The market’s attention remains firmly on the upcoming US Non-Farm Payrolls (NFP) report, which is seen as a key factor influencing the next direction in the US dollar’s strength and overall sentiment around interest rate expectations. The pair’s climb signals a broader demand for the dollar, as traders weigh macroeconomic data and central bank policy expectations across the globe.
Overview of Recent USD/JPY Price Action
– The USD/JPY pair advanced modestly during the early European hours, rising to levels just shy of 156.50.
– The gain follows multiple sessions of consolidation after briefly touching the 157.00 zone earlier in the week.
– Traders remain cautiously bullish on the US dollar heading into the US jobs report, which could offer fresh insight into the Federal Reserve’s policy trajectory.
– Meanwhile, trading volumes are subdued as investors position themselves for potential volatility post-NFP release.
Focus on the US Non-Farm Payrolls
– The NFP report, due for release later in the New York session, is the main event risk influencing short-term direction in USD/JPY.
– Market consensus expects approximately 180,000 to 190,000 jobs added in the previous month, with any upside or downside deviation likely to catalyze significant movement in the US dollar.
– Strong job creation figures would support the Federal Reserve’s hawkish stance, underpinning expectations for interest rates to remain elevated for longer.
– Conversely, weaker-than-expected data could reignite speculation around rate cuts or a dovish pivot later in the year.
Implications for US Dollar Strength
– The greenback has strengthened modestly against its major competitors so far this week, buoyed by higher yields on US Treasury bonds and diminished expectations of imminent Fed rate cuts.
– Sterling, euro, and yen have all traded defensively against the dollar due to varied local economic concerns and comparatively more dovish central bank outlooks.
– A stronger NFP print will likely reinforce bullish sentiment around the dollar, offering more upside to pairs like USD/JPY.
Japanese Yen Under Pressure Despite MOF Vigilance
– The Japanese yen remains broadly weak against the US dollar, continuing a multi-month trend triggered by diverging monetary policy paths between the Bank of Japan (BoJ) and the Federal Reserve.
– While the BoJ has modestly shifted away from ultra-expansionary policy, yields in Japan remain substantially lower than in the US, making the yen less attractive.
– The Ministry of Finance (MOF) in Japan has recently intervened verbally and, at times, directly in the currency markets to stem yen losses. Yet these attempts have only temporarily arrested USD/JPY’s upward trajectory.
– Market participants remain aware of the risk of further intervention by Japanese authorities, especially if the pair approaches or surpasses key technical thresholds such as 157.00 or 160.00.
Key Influences on USD/JPY Movement This Week
1. US Economic Data
– Beyond the NFP, other labor market readings like the ADP Employment Report, Job Openings and Labor Turnover Survey (JOLTS), and weekly jobless claims have painted a mixed picture of the jobs market.
– Average Hourly Earnings and Labor Force Participation figures accompanying the NFP will also shape investor sentiment.
– Core PCE data released earlier in the week underscored lingering inflationary pressures, reaffirming the Fed’s inclination to sustain higher rates.
2. Federal Reserve Commentary
– Speeches and public remarks from key Federal Reserve officials continue to lean toward cautious optimism regarding inflation containment, but assert that more progress is needed.
– Chair Jerome Powell and other Fed Governors have not signaled an imminent rate cut, contributing to currency markets pricing in a “higher for longer”
Explore this further here: USD/JPY trading.