Weak US Jobs Data Weighs on Fed Tightening Expectations

Despite weakness seen in key US labour market indicators last week, USDJPY is starting the week in the green. On Friday, the latest jobs report was a mixed bag. The headline NFP reading was seen coming in above forecasts at 187k vs 169k expected, though the prior reading was revised lower to 157k. The unemployment rate was seen moving higher to 3.8% from 3.5% prior and expected while wage growth was seen falling to 0.2% down from the 0.4% prior and below the 0.3% the market was looking for. On the whole, despite the headline NFP beat, the data was seen as consistent with the view that the Fed will not hike again this year (beside any upside inflation surprise).

BOJ on Watch

JPY has been under plenty of scrutiny recently with traders speculating over potential BOJ intervention given the ongoing weakness. While Japanese authorities have warned that they are monitoring FX moves, BOJ governor Ueda last week reaffirmed the bank’s commitment to maintaining an easing presence. These comments were echoed by BOJ’s Nakamura who said that the bank must patiently maintain an easing stance for now. As such, there is room for JPY to weaken further near-term.

Technical Views

USDJPY

The rally in USDJPY has seen the market breaking out above the 145 level though, for now, the move has stalled into a test of the bull channel top. Momentum studies have weakened recently, raising reversal risks. However, while the market holds above the 142.21 level, the focus remains on further push higher and a continuation of the bull trend towards the 151.83 level thereafter. Notably, we have a bullish signal in the Signal Centre today below market at  145.48, targeting a move back up towards 147.