Title: USD/JPY Retraces NFP Gains, Tests Key Support Ahead of US CPI Data
By: InvestingLive.com Staff
Original Article by: InvestingLive.com, February 12, 2024
Source: https://investinglive.com/forex/usdjpy-fades-quickly-nfp-gains-and-falls-to-a-key-trendline-us-cpi-in-focus-now-20260212/
The USD/JPY currency pair faced renewed selling pressure early in the week, erasing gains made after the recent US Non-Farm Payrolls (NFP) report. Markets are now closely watching upcoming inflation data for further confirmation of the Federal Reserve’s next steps. As expectations shift and traders adopt a more cautious approach, technical levels and macroeconomic indicators are becoming increasingly significant for short-term price action.
Here is an in-depth look at the latest developments affecting the USD/JPY pair, including technical analysis, fundamental drivers, and what traders should keep an eye on in the days ahead.
US Dollar Initially Rallies on Strong NFP Report
On Friday, February 9, the US dollar saw a strong uptick against several major counterparts following the release of a solid NFP report that exceeded market expectations. USD/JPY surged to test higher resistance levels as market participants digested the blowout data.
Key details of the NFP report include:
– Non-farm payrolls rose by 353,000 in January, far exceeding the consensus forecast of 185,000.
– The unemployment rate remained unchanged at 3.7 percent compared to the previous month.
– Average hourly earnings increased 0.6 percent month-over-month, highlighting tight labor conditions.
These strong figures initially suggested a resilient US economy, reinforcing expectations that the Federal Reserve might delay any rate cuts amid persistent inflationary trends.
However, despite these bullish data points, the USD/JPY pair failed to sustain its upward momentum, retreating within just one trading session. A combination of technical resistance and renewed focus on upcoming data led to profit-taking and renewed pressure on the greenback.
USD/JPY Pullback: A Technical Perspective
After inability to hold above key resistance levels near the 149.50–150.00 zone, USD/JPY reversed direction and pulled back sharply. The decline extended on Monday, February 12, with the pair falling back toward major support around a key ascending trendline that has guided price action since early 2023.
Important technical observations include:
– USD/JPY encountered stiff resistance at the psychological 150.00 level, which has historically represented a ceiling for the pair.
– As price reversed, it fell toward rising channel support near the 148.00 handle — a trendline connecting higher lows from October 2023.
– Daily RSI indicators rolled over from near-overbought conditions, confirming a momentum shift in favor of sellers.
– Short-term moving averages (20-day and 50-day) are beginning to flatten, indicating a tentative pause in the prior uptrend.
A break below the 148.00 trendline support could encourage further bearish momentum, particularly if macro data bolsters growing disinflationary narratives.
US Inflation Data in Focus: The Next Market Catalyst
Looking ahead, attention has turned to the upcoming release of January’s Consumer Price Index (CPI) data scheduled for Tuesday, February 13. This inflation reading will be pivotal in shaping monetary policy expectations and could determine the next directional move in USD/JPY.
Market expectations for the CPI include:
– Headline CPI (YoY) is forecast at 2.9 percent, down from December’s 3.4 percent.
– Core CPI (YoY), which excludes food and energy, is projected at 3.8 percent, compared to the previous month’s 3.9 percent.
If these expectations are met or inflation comes in even lower than forecast, this would strengthen the argument for the Federal Reserve to begin easing policy later in 2024. Such a shift
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