- The Bank of Japan kept rates unchanged on Thursday.
- Japan’s ruling party lost most of its seats.
- The US dollar paused its gains ahead of the release of the non-farm payrolls report.
The USD/JPI outlook turned slightly bearish due to the absence of dovish remarks at the Bank of Japan’s policy meeting. At the same time, the dollar lost ground after mixed data in the previous session. Market focus shifted to the upcoming NFP report and the US presidential election.
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The Bank of Japan kept rates unchanged on Thursday, as expected. However, market participants were looking forward to even more dovish commentary following the recent Japanese election. Japan’s ruling party lost most of its seats, creating uncertainty around the political landscape. Therefore, traders set prices in a more cautious tone and sent messages about delaying rate hikes. However, there was no such message, allowing the yen to strengthen.
Meanwhile, the US dollar paused its gains ahead of the non-farm payrolls report and the US election. Recent reports have shown a mixed picture of the economy, leaving bets on a Fed rate cut largely unchanged. Data on Wednesday showed better-than-expected employment growth in the private sector. Private employers added an additional 233,000 jobs in October, well above forecasts of 110,000. Another report found the economy grew 2.8% in the third quarter, below estimates of 3.0%.
However, the labor sector remained resilient. Therefore, there is less pressure on the Fed to reduce borrowing costs. All eyes are now on the PCE price index and the non-farm payrolls report. Economists expect slower job growth in October.
At the same time, traders are cautious ahead of the US presidential election, which could affect fiscal and monetary policy.
USD/JPI Key Events Today
- Core US price index PCE m/m
- US employment cost index c/c
- US unemployment claims
USD/JPI Technical Outlook: Bears are winning the battle for control at the 30-SMA
From the technical side, USD/JPY the price broke below the 30-SMA and the support level of 153.00, indicating a change in bearish sentiment. At the same time, the RSI fell below 50, indicating solid bearish momentum.
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The change comes after the RSI made a bearish divergence, signaling a weakening of the bullish momentum. However, bears must make lower highs and lows to confirm a new downtrend. If that happens, the price will revisit the support levels, including 150.00 and 148.00.
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