- The dollar strengthened on the Fed’s hawkish remarks.
- The yen strengthened after hints that the BoJ may raise interest rates.
- US data on Thursday revealed a rise in jobless claims.
The USD/JPI outlook is slightly bullish as the dollar gains momentum on the Fed’s hawkish remarks. However, the yen is also holding its ground, boosted by hints of a potential interest rate hike from the Bank of Japan. At the same time, there is caution in the markets ahead of the NFP report.
The dollar strengthened despite a weak jobs report on Thursday as Fed officials scaled back expectations of a rate cut. Initially, the dollar fell after the US released data showing a rise in jobless claims. Jobless claims rose to their highest level in two months, indicating an increase in unemployment. Accordingly, bets on a rate cut have increased.
However, this soon changed as Fed officials took a hawkish tone. Some officials, including Neal Kashkari and Thomas Barkin, said the Fed still had plenty of time to ensure inflation reached its target. Therefore, there was no rush to reduce rates. Kashkari even said there might not be a need for a rate cut this year. These remarks softened expectations of a rate cut and lifted the dollar higher.
Investors will now watch non-farm payrolls for more clues about rate cuts. Economists expect a decline in employment in March.
However, gains were small in the USD/JPY pair as the yen also strengthened. BoJ Governor Kazuo Ueda said inflation is likely to accelerate after recent wage increases. Market participants took this as a hint that the central bank may be planning another rate hike. Consequently, Japanese yields rose, boosting the yen. At the same time, Finance Minister Shunichi Suzuki warned that the authorities will do whatever it takes to stop the yen from falling further.
USD/JPI Key Events Today
- Average hourly earnings in the US m/m
- Change in non-farm employment in the US
- Unemployment rate in the US
On the technical side, the price of USD/JPI broke below the 30-SMA with strong bearish candles. At the same time, the RSI is now trading below 50, supporting bearish momentum. The price has been trading in a tight consolidation since it made the engulfing candle. However, it has now made a strong move lower which could lead to further declines.
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Before the price continues lower, it could pull back to retest the 30-SMA as resistance. Bears are likely to target the key support level of 150.00 if the SMA remains firm.
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