- Investors were eyeing the upcoming US non-farm payrolls report.
- Economists forecast an increase of 165,000 jobs in the US in August.
- Data from Japan revealed that the manufacturing PMI contracted at a slower rate last month.
The USD/JPI outlook is slightly bearish as the dollar retreats ahead of key US employment data. Meanwhile, the yen steadied as the outlook for a BoJ rate hike improved following Japan’s manufacturing PMI report.
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The dollar fell against the yen on Tuesday as investors eyed the upcoming US non-farm payrolls report. Still, it remained near the highs hit after Friday’s US PCE figure. Inflation rose as expected in July, increasing the likelihood of a gradual Fed rate cut cycle. As a result, the dollar strengthened. However, this outlook could change as investors get more data. In particular, the next major report will show the state of the labor market.
Economists forecast an increase of 165,000 jobs in August, more than the previous month. Meanwhile, the unemployment rate could decrease from 4.3% to 4.2%. If the numbers are in line with expectations, it will solidify bets for a smaller rate cut, which is likely to boost the dollar. On the other hand, if unemployment continues to rise, the Fed may be forced to implement a significant rate cut.
Meanwhile, data from Japan on Friday revealed that manufacturing PMI contracted at a slower pace than last month. The PMI rose from 49.1 in July to 49.8, remaining below 50. Moreover, it was higher than estimates of 49.5, a sign that business activity in the manufacturing sector is recovering faster than expected.
Furthermore, the report showed that input prices rose due to a weak yen, which fueled inflation. This was a relief for the BoJ, which needs higher inflation to keep raising interest rates.
USD/JPI Key Events Today
USD/JPI technical outlook: SMA support to retest price
On the technical side, the USD/JPI price is pulling back to retest the 30-SMA support after a strong bull run. Despite the pullback, the bullish bias remains intact, with price above the SMA and RSI just above 50. Therefore, the pullback could pause and bounce higher after retesting the SMA to resume the uptrend.
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If the bulls return to the 30-SMA, the price is likely to reach the resistance level of 149.01. This would be a higher high, solidifying the bullish bias.
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