Article Rewrite Credit: Original article by FXStreet
Title: USD/JPY Declines Toward 147.00 as US Dollar Weakens After NFP Data Release
The USD/JPY pair traced a downward path on Friday, inching closer to the 147.00 level. This movement came following the release of the latest US Nonfarm Payrolls (NFP) data, which played a significant role in reshaping market expectations regarding the Federal Reserve’s policy stance. The disappointing aspects of the jobs data weakened the US Dollar (USD), added to dovish Fed sentiment, and led to a stronger Japanese Yen (JPY). The markets are now focusing on further economic indicators and central bank commentary to predict future interest rate directions.
Labor Market Data Drives Market Reaction
The key catalyst behind the USD weakness on Friday was the release of the US Bureau of Labor Statistics’ February Nonfarm Payrolls report. While job creation extended for another month, several internal details of the report contributed to the selling pressure on the USD.
Highlights from the report:
– The US economy added 275,000 jobs in February, exceeding the median forecast of 200,000 jobs.
– The prior month’s data was revised downward significantly, from the reported 353,000 jobs to 229,000.
– The unemployment rate rose unexpectedly from 3.7% to 3.9%, indicating some softening in the labor market.
– Average Hourly Earnings, a key inflation metric, rose by 0.1% on a monthly basis, falling short of the 0.3% expectations and slowing compared to 0.5% the previous month.
– On a year-over-year basis, wages rose 4.3%, down from 4.5% in January.
While the headline job creation remained strong, downward revisions to prior data alongside rising unemployment and slower wage growth led traders to assume the Federal Reserve could lean more dovish in upcoming meetings.
Market Interpretation: Dovish Fed Expectations Strengthen
Investor sentiment turned cautious after the details of the NFP report unveiled a more fragile labor market than initially perceived. The evidence of moderating wage growth particularly caught the market’s attention, as it may signal lower inflationary pressures in the months ahead. Slowing inflation and softening employment conditions both support the narrative that the Fed may consider a policy shift sooner than previously anticipated.
Market expectations were swiftly revised following the release:
– The CME FedWatch Tool shows that traders are now pricing in greater odds of a Fed rate cut in June.
– Market odds for a 25 basis point rate cut in June climbed above 70%, compared to roughly 50% earlier in the week.
– Treasury yields fell in response to the dovish sentiment, with the 10-year yield retreating from recent highs above 4.10% to around 4.06%.
These changes in rate expectations directly impacted the strength of the US Dollar, pushing USD/JPY downward during Friday’s trading session.
USD/JPY Technical Breakdown
The weakening dollar dragged the USD/JPY pair lower, pulling it closer to the critical 147.00 psychological support level. Price action showed a clear reversal from recent highs, suggesting a shift in short-term momentum.
Key technical insights include:
– As of Friday afternoon, USD/JPY was trading near 147.25, down nearly 0.5% on the day.
– The pair had earlier in the week tested resistance near the 149.00 level, but failed to break higher, forming a lower high pattern.
– The 50-day Simple Moving Average (SMA) is positioned around 147.30, now acting as immediate support. A clean break below this level could open up renewed downside movement.
– The 147.00 level itself is a key psychological area and has acted as important support in recent months.
– Momentum indicators such as the Relative Strength Index (RSI) are showing weakening bullish momentum, now near neutral territory.
If this downward trend
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