USDJPY consolidates around 148.00 mark, eyes US NFP report for fresh impetus

The USDJPY pair extended its sideways consolidative price move for the second straight day on Friday and remains confined in a narrow band through the early European session. The pair is currently trading around the 148.00 round-figure mark as traders await the release of the closely-watched US monthly jobs data (NFP) for a fresh impetus.

In the meantime, a modest US Dollar pullback from a nearly two-week high touched on Thursday acts as a headwind for the USDJPY pair. Apart from this, speculations that Japanese authorities might intervene again to soften any steep fall in the domestic currency further contribute to capping the upside for spot prices, at least for the time being. That said, a big divergence in the monetary policy stance adopted by the Federal Reserve and the Bank of Japan (BoJ) might continue to lend support and limit any meaningful decline.

In fact, 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 BoJ, 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, in turn, favours the USDJPY bulls and supports prospects for further gains.

Traders, however, seem reluctant to place aggressive bets ahead of the key US macro data. The popularly known NFP report, along with the US bond yields, will play a key role in influencing the USD price dynamics and produce short-term trading opportunities around the USDJPY pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside and any downtick is more likely to get bought into.

Technical levels to watch