- The yen rallied slightly on Friday, but is headed for a loss of over 2.5% for the week.
- Consensus estimates point to an increase in US employment of 148,000 in September.
- Japanese Prime Minister Ishiba dashed hopes of a short-term rate hike.
The USD/JPI outlook shows a break near recent peaks ahead of key US monthly employment data. The dollar hovered near a six-week high on support from a slightly hawkish Fed, upbeat data and tensions in the Middle East. On the other hand, the yen rallied slightly on Friday, but is headed for a loss of over 2.5% for the week.
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Market participants are preparing to receive US non-farm payrolls that will provide clues on Fed policy. Consensus estimates point to an increase in employment of 148,000 in September. Meanwhile, the unemployment rate is likely to remain at 4.2%. Recent US data has shown the economy’s unexpected resilience.
If this trend continues, NFP could beat expectations. An upbeat report would reduce bets for a 50 bps rate cut. However, if employment falls sharply, the Fed would be forced to consider another big cut in November. In particular, Powell recently noted that the Fed could cut twice this year by 25 basis points each. Employment figures could change this outlook.
Meanwhile, data on Thursday showed better-than-expected business activity in the services sector, pointing to a strong economy. Meanwhile, the dollar remained near its weekly highs as Middle East tensions spooked traders. The war in the Middle East has spread to Iran and Lebanon. Iran made a bold attack on Israel, which could lead to retaliation.
In Japan, new Prime Minister Ishiba dashed hopes of a near-term rate hike. He said that the economy is not ready for more rate hikes. However, economists predict at least one such move this year.
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
USD/JPI Technical Outlook: Rally stalls near resistance at 147.01
From the technical side, USD/JPY the price pulled back after finding solid resistance at the 147.01 level. However, the bullish bias remains strong, with price well above the 30-SMA and RSI in bullish territory.
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Furthermore, the price is trading within a bullish channel with clear support and resistance lines. The bulls recently touched the resistance channel, where the bears have been waiting to take over. However, if the bulls remain strong, the price will continue to climb to break above 147.01. Otherwise, you will stop revisiting the channel support.
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