Japanese Yen slides to fresh daily low against against USD, US NFP looms large

  • The Japanese Yen struggles to capitalize on its intraday strength to over a two-week top.
  • A modest USD strength assists USD/JPY to recover early lost ground to sub-151.00 levels. 
  • The risk-off mood, along with intervention fears, could limit losses for the safe-haven JPY. 
  • Traders now look to the release of the US jobs data (NFP) for some meaningful impetus.

The Japanese Yen (JPY) meets with a fresh supply after rising to over a two-week high against its American counterpart earlier this Friday and drops to a daily low during the first half of the European session. The downfall could be attributed to some follow-through US Dollar (USD) buying, bolstered by the overnight hawkish remarks by Federal Reserve (Fed) officials. That said, any meaningful depreciating move seems elusive in the wake of the prevalent risk-off environment, which tends to drive flows towards the safe-haven JPY. 

Apart from this, speculations that Japanese authorities will intervene in the markets to prop up the domestic currency should help limit the downside for the JPY. Furthermore, the Bank of Japan Governor Kazuo Ueda signaled a chance of a rate hike if the JPY moves affect inflation and wages, which might further hold back the JPY bears from placing fresh bets. This, in turn, warrants caution before confirming that the USD/JPY pair pullback from a multi-decade high has run its course as traders look to the US NFP for fresh impetus.

Daily Digest Market Movers: Japanese Yen turns lower despite hawkish BoJ talks, intervention fears and risk-off

  • Iran has vowed to retaliate against the Israeli attack on its embassy in Syria, raising the risk of a further escalation of geopolitical tensions in the Middle East and boosting the safe-haven Japanese Yen. 
  • Bank of Japan Governor Kazuo Ueda reportedly said on Friday that the central bank could respond with monetary policy if FX moves have an impact on the wage-inflation cycle in a way that is hard to ignore.
  • Ueda added that the chance of sustainably, stably achieving BoJ’s 2% inflation target is in sight and is likely to keep heightening as this year's pay raises in annual wage negotiations could push up prices.
  • Former top Japanese currency official Tatsuo Yamazaki said on Thursday that authorities will likely intervene in the currency market if the JPY breaks out of the range and weakens beyond 152 per dollar.
  • Japan's Finance Minister Shunichi Suzuki reiterated that he is closely watching foreign exchange moves with a high sense of urgency and won't rule out any options to deal with excessive FX volatility. 
  • Data released earlier today showed that Japanese household spending fell 0.5% in February from a year earlier, down for the 12th straight month, though better than estimates for a 3.0% decline.
  • The US Department of Labor reported on Thursday that the number of Americans applying for unemployment insurance increased to 221K in the week ending March 30 against 214K expected. 
  • This pointed to signs of cooling in the labor market and reinforced market expectations that the Federal Reserve will start cutting interest rates in June, dragging the US Dollar to a two-week low. 
  • Meanwhile, Minneapolis Fed President Neel Kashkari said that he penciled in two interest rate cuts this year and that rate cuts might not be required if inflation continues to move sideways.
  • Adding to this, Richmond Fed President Thomas Barkin noted that he was open to interest rate cuts once it is clear progress on inflation will be sustained and applied more broadly in the economy.
  • The hawkish outlook keeps the US Treasury bond yields elevated, which allowed the USD to stage a late recovery, though the momentum faded rather quickly during the Asian session on Friday.
  • Investors now look forward to the closely-watched US monthly jobs data, popularly known as the Nonfarm Payrolls (NFP) report, for cues about the Fed's rate cut path and some meaningful impetus.

Technical Analysis: USD/JPY shows some resilience below 151.00, recovers its early lost ground to over a two-week low

From a technical perspective, a convincing break and acceptance below the 151.00 mark could be seen as a breakdown through a short-term trading range. That said, oscillators on the daily chart – despite losing traction – are still holding in positive territory. Hence, any subsequent slide is more likely to find decent support near the 150.25 region. This is closely followed by the 150.00 psychological mark, which, if broken decisively, will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair towards the 149.35-149.30 region en route to the 149.00 mark.

On the flip side, the 151.30-151.35 zone now seems to act as an immediate hurdle ahead of the 151.70 area and the multi-decade high, near the 152.00 mark. The latter represents a possible intervention level and should act as a strong near-term barrier. A sustained strength beyond, however, might trigger a fresh bout of a short-covering move and lift the USD/JPY pair towards the 153.00 round figure.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews ​and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Read more.

Next release: Fri Apr 05, 2024 12:30

Frequency: Monthly

Consensus: 200K

Previous: 275K

Source: US Bureau of Labor Statistics

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.


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