- The US economy added fewer than 175,000 jobs last month.
- The US unemployment rate rose to 3.9 percent in April.
- The yen gained 3.5 percent last week, ending its best week since December 2022.
The USD/JPI forecast shows a temporary break in the downtrend as the dollar rebounded on Monday. Still, the recent decline in US employment has fueled expectations of a Fed rate cut in 2024. Meanwhile, the yen is maintaining its strength after the Bank of Japan’s alleged intervention last week.
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The US economy added 175,000 jobs last month, compared with estimates for 243,000. Meanwhile, the unemployment rate rose to 3.9% when economists had expected it to remain at 3.8%. This was the first bad NFP report in some time and came as a relief to Fed policymakers. As a result, the Fed could cut rates at least twice this year.
Following the report, markets are pricing in a 45 basis point rate cut in 2024. However, analysts believe policymakers need more evidence that the downward trend in the labor market will continue. However, if the next jobs report is solid, policymakers will remain cautious about cutting rates. Meanwhile, they will cheer for any sign of weakness in the labor market because it will mean less inflationary pressure.
Elsewhere, the yen remained strong despite Monday’s retreat. Notably, the currency gained 3.5% last week, completing its best week since December 2022. The gains followed two questionable interventions by Japanese authorities on Monday and Wednesday. This gave them some time to reduce the economic effects of a weak currency.
USD/JPI Key Events Today
There are no critical reports from the US today. Meanwhile, Japan is celebrating a holiday, which will keep investors on the lookout for any intervention.
USD/JPI Technical Forecast: Pullback inside a bullish flag
On the technical side, the price of USD/JPI retested the critical level of 154.01 after making a new low. The bias is bearish as price is trading well below the 30-SMA, while the RSI sits below 50 in bearish territory. Moreover, the price trades in the form of a flag, respecting its support and resistance.
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If the key level of 154.01 proves resistant, the price will jump lower and likely reach the support level of 151.01. However, if the resistance breaks, it will retest the resistance of its channel and the 30-SMA before it declines.
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