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Japanese Yen sits near August highs as USD remains on the back foot ahead of US NFP

  • USD/JPY remains depressed near a one-month low amid a combination of factors.
  • Reduced September Fed hike bets and declining US bond yields weigh on the USD.
  • A more hawkish BoJ rate repricing and a suspected intervention underpin the JPY.

The USD/JPY pair enters a bearish consolidation phase during the Asian session on Friday and currently trades near the 155.75 region, nearly unchanged for the day. Nevertheless, spot prices remain close to the August monthly swing low and seem poised to register heavy weekly losses as traders await the release of the closely watched US monthly employment details.

The popularly known US Nonfarm Payrolls (NFP) report will be looked upon for more cues about the Federal Reserve's (Fed) future policy path amid reduced bets for a September rate hike. The outlook, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some impetus to the USD/JPY pair. Heading into the key data risk, the fundamental backdrop warrants caution for bullish traders before positioning for any meaningful recovery.

On Thursday, Fed Governor Christopher Waller offered optimism that inflation is showing some signs of slowing, leaving the door open for keeping policy unchanged at the upcoming FOMC meeting. Traders responded by pushing US bond yields lower, which led to the overnight USD slump to an over one-week low. The Japanese Yen (JPY), on the other hand, continues to draw support from a more hawkish repricing of the Bank of Japan (BoJ) rate hike bets, capping the USD/JPY pair.

Traders now seem to have fully priced in a 25 basis point (bps) rate hike at the September 17–18 BoJ meeting and the possibility of a follow-up move in December. The bets were lifted following BoJ board member Hajime Takata's comments that the central bank should adopt a more nimble approach to rate hikes rather than sticking to the predictable semi-annual pace. This, along with a suspected intervention, favors JPY bulls and could further weigh on the USD/JPY pair.

USD/JPY 4-hour chart

Chart Analysis USD/JPY

Technical Analysis

Against the backdrop of this week's failed attempt to conquer the 200-period Simple Moving Average (SMA) on the 4-hour chart, weakness below the August swing low near 155.25-155.20 will be seen as a fresh trigger for bearish traders. The USD/JPY pair might then weaken further below the 155.00 psychological mark and extend its recent sharp corrective pullback from a four-decade high.

On the topside, a sustained above the 200-period SMA and the 160.00 psychological mark would be needed to ease the current downside pressure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen Price This week

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.41%0.02%-2.73%-0.87%-0.64%0.59%-0.07%
EUR0.41%0.44%-2.30%-0.43%-0.25%0.96%0.35%
GBP-0.02%-0.44%-2.80%-0.90%-0.71%0.51%-0.17%
JPY2.73%2.30%2.80%1.81%2.10%3.26%2.59%
CAD0.87%0.43%0.90%-1.81%0.22%1.43%0.73%
AUD0.64%0.25%0.71%-2.10%-0.22%1.20%0.51%
NZD-0.59%-0.96%-0.51%-3.26%-1.43%-1.20%-0.68%
CHF0.07%-0.35%0.17%-2.59%-0.73%-0.51%0.68%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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