USD/JPY trades cautiously positive around 144.00 ahead of key US data

USD/JPY trades cautiously higher around 144.00 ahead of the US NFP data for June.
Soft US labor market would accelerate Fed dovish bets for the July policy meeting.
BoJ Takata is hopeful that the central bank will resume monetary tightening gradually.

Sagar Dua FXStreet

The USD/JPY pair edges higher to near 143.90 during European trading hours on Thursday. The pair trades cautiously higher as the US Dollar (USD) ticks up ahead of the United States (US) Nonfarm Payrolls (NFP) data for June, which will be published at 12:30 GMT.

The official employment data will significantly influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook as officials have cited growing labor market concerns lately and have supported interest rate cuts for addressing the same.

"The Fed should not wait for the job market to crash in order to cut rates," Fed Governor Christopher Waller said in an interview near the last week of June.

Economists expect US employers to have added 110K workers, fewer than 139K in May. The Unemployment Rate is estimated to have accelerated to 4.3% from the prior reading of 4.2%.

On the global front, investors are awaiting development in trade negotiations between Washington and its trading partners as the reciprocal tariff deadline of July 9 approaches. Meanwhile, the US has struck a trade agreement with Vietnam in which it has slashed additional tariffs to 20% from 40% announced earlier.

In Japan, Bank of Japan (BoJ) officials continue to keep the door open for more interest rate hikes. BoJ board member Hajime Takata stated earlier in the day that the central bank could resume the monetary tightening cycle steadily after scrutinizing the impact of tariffs by the US.

“My view is that the BoJ needs to support economic activity for the time being by maintaining its current accommodative monetary policy stance, Takata said and added, “At the same time, I believe BoJ should gradually and cautiously shift gears in its monetary policy.”

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.

Why it matters to traders?

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.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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