USD/JPY Dives Further as US Labour Data Sparks Treasury Selloff and Yen Strength

Rewritten Forex Article Based on Original by Eren Sengezer, via Mitrade:

Title: USD/JPY Extends Decline Amid Falling Treasury Yields Following US Labour Market Data

Author: Eren Sengezer (Original source: Mitrade News)

Overview

The USD/JPY pair experienced a notable decline on Friday, impacted primarily by the latest U.S. labour market data, which showed cooling employment figures. The weaker-than-expected jobs report prompted a sell-off in the U.S. dollar and a drop in Treasury yields, resulting in downward momentum for the USD/JPY currency pair.

At the beginning of the trading day, the pair attempted to regain its footing but failed to hold above the critical psychological level of 145.00. As U.S. market participants digested the new employment figures, USD/JPY faced increased selling pressure, pushing the price below 144.00.

Key Drivers of the USD/JPY Downturn

Several macroeconomic indicators and market dynamics contributed to the downward pressure on the USD/JPY pair:

US Nonfarm Payrolls Report:
– The U.S. Labor Department revealed that Nonfarm Payrolls for August increased by 187,000 jobs.
– This was higher than the market forecast of 170,000, initially perceived as a positive indicator.
– However, the positive impact was muted due to significant downward revisions to previous months.
– June payrolls were revised down to 105,000 from 185,000.
– July payrolls were also revised down to 157,000 from the initially reported 187,000.
– The revisions brought greater attention to the continued trend of labour market weakness.

Unemployment Rate and Wage Growth:
– Unemployment in the U.S. rose to 3.8% from the prior 3.5%, exceeding expectations of 3.5%.
– Average hourly earnings growth slowed to 4.3% in August compared to July’s 4.4% year-over-year pace.
– Monthly wage growth also eased, growing just 0.2% compared to a 0.4% increase in the previous period.

Declining Treasury Yields:
– U.S. Treasury yields fell sharply immediately after the release of the employment report.
– The yield on the benchmark 10-year Treasury note declined from approximately 4.12% to around 4.05%.
– Falling Treasury yields dimmed the dollar’s appeal, leading investors to seek safer assets like the Japanese yen.

Federal Reserve Interest Rate Expectations:
– The softer labour data fueled market speculation that the Federal Reserve may pause its tightening cycle.
– Traders adjusted their bets, with the CME FedWatch Tool indicating reduced odds of another rate hike in the coming FOMC meetings.
– As investors bet on a less hawkish Fed, the dollar faced broad selling pressure.

Bank of Japan Policy Outlook:
– On the Japanese side, investors remained cautious about the Bank of Japan (BoJ).
– Earlier in the week, BoJ board member Hajime Takata suggested that conditions for modifying the ultra-loose monetary policy might be forming.
– Despite this hint, the BoJ maintained its current stance with no immediate plans to raise interest rates.
– The yen’s modest strength on the back of risk aversion helped amplify USD/JPY’s drop.

Technical Analysis: USD/JPY Daily Chart

From a technical standpoint, the USD/JPY pair is showing signs of a bearish reversal. Analysts are now watching key support and resistance levels as the market responds to week-ending data.

Support Levels:
– Initial support sits near the 144.00 level, which was broken during the recent decline.
– A more substantial support zone is seen around 143.50, followed by 142.80.
– The 100-day simple moving average (SMA) around 141.50 could serve as a longer-term support if selling intensifies.

Resistance Levels:
– Immediate resistance remains at the 145.00 psychological barrier.

Explore this further here: USD/JPY trading.

Leave a Comment

Your email address will not be published. Required fields are marked *

five × 3 =

Scroll to Top