USDJPY bounces off daily low, keeps the red below mid-147.00s amid weaker USD
|- USDJPY comes under some selling pressure amid broad-based USD weakness.
- The mixed US jobs data does little to impress the USD bulls or lend any support.
- The risk-on impulse and the Fed-BoJ policy divergence should limit the downside.
The USDJPY pair comes under some selling pressure during the early North American session and drops to a fresh daily low in the last hour. Spot prices, however, quickly recover a few pips from sub-147.00 levels, though remain in the negative territory amid the heavily offered tone surrounding the US Dollar.
In fact, the USD Index retreats further from a two-week high touched the previous day in reaction to the mixed US monthly employment details, which, in turn, is seen exerting pressure on the USDJPY pair. The closely-watched NFP report showed that the US economy added 261K new jobs in October against the 200K estimated. Furthermore, the previous month's reading was also revised higher to 315K from the 263K. That said, a slight disappointment from the unemployment rate, which rose to 3.7%, overshadows the upbeat headline prints and weighs on the greenback.
Furthermore, speculations that Japanese authorities might intervene again to soften any steep fall in the domestic currency contribute to offered tone surrounding the USDJPY pair. That said, the risk-on impulse - as depicted by a strong rally in the equity markets - should keep a lid on any further gains for the safe-haven JPY. Apart from this, a more hawkish stance adopted by the Federal Reserve should act as a tailwind for the greenback. This, in turn, should help limit the downside for the major and warrants some caution for aggressive bearish traders.
It is worth recalling that Fed Chair Jerome Powell smashed expectations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle. Powell added that the terminal rate will still be higher than anticipated, which remains supportive of elevated US Treasury bond yields. In contrast, the Bank of Japan, so far, has shown no inclination to hike interest rates and reiterated that it will continue to guide the 10-year bond yield at 0%. This results in a further widening of the US-Japan rate differential and favours the USDJPY bulls.
Technical levels to watch
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