- The USD/PI pair hit new lows on Friday after a mixed US jobs report.
- The U.S. nonfarm payrolls report showed slower job growth in August.
- Japan’s GDP rose 2.9% compared to estimates of 3.2%.
The USD/JPI forecast shows the pair recovering slightly from Friday’s decline as the yen loses some of its luster. At the same time, the dollar strengthened as it became clear that the Fed could gradually cut rates.
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Following a mixed US employment report, the USD/PI pair hit new lows on Friday. The nonfarm payrolls report showed slower job growth, with the economy adding 142,000 jobs compared to estimates of 160,000. Meanwhile, the unemployment rate has decreased to 4.2%.
The initial reaction was a fall in the US dollar. However, it recovered as it became clear that the labor market was steadily slowing. Therefore, the risk of recession remains low. Although most majors lost against the dollar on Friday, the yen remained steady on optimism over the rate hike.
Namely, on Thursday BoJ board member Hajime Takata said that the central bank should continue to raise interest rates. Still, he stressed a cautious approach amid heightened market volatility. Policymakers are willing to raise interest rates as long as economic spending increases.
However, by Monday morning, economic data from Japan dampened optimism for a rate hike. Japan’s economy grew more slowly than expected in the second quarter. GDP grew by 2.9% compared to estimates of 3.2%. Weaker-than-expected economic performance poses a challenge to the BoJ’s rate hike outlook.
USD/JPI Key Events Today
Market participants do not expect any high-impact economic releases in Japan or the US.
USD/JPI Technical Forecast: Bears found a bottom at the 142.03 support level
On the technical side, the USD/JPI price is recovering after finding support at the 142.03 level. However, the price is trading below the 30-SMA, with the RSI in bearish territory. Therefore, the bias is bearish, which means that the rebound could only be temporary.
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Bulls are approaching a solid resistance zone consisting of key levels of 0.382 Fib and 144.00. Furthermore, the SMA trades just above this zone. Accordingly, the price is likely to pause at this level and jump lower. A break below 142.03 will confirm the continuation of the decline.
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