Japanese Yen hangs near daily low against USD, focus remains glued to US NFP report

The Japanese Yen surged to a four-month top against the USD after BoJ Governor Ueda’s comments on Thursday.
Rebounding US bond yields push the USD higher and assist USD/JPY to find support near the mid-142.00s on Friday.
The divergent BoJ-Fed policy expectations keep a lid on any further recovery ahead of the crucial US NFP report.

The Japanese Yen (JPY) struggles to preserve its intraday gains against the US Dollar (USD) and lifts the USD/JPY pair above the 144.00 mark during the early European session on Friday. Following the previous day's pullback from a two-week high, the US Dollar (USD) regains positive traction in the wake of a further recovery in the US Treasury bond yields. Meanwhile, a downward revision to Japan’s third-quarter GDP print, along with a generally positive risk tone, undermines the safe-haven JPY and turns out to be another factor lending support to the major.

The upside for the USD/JPY pair, however, seems limited amid bets that the Bank of Japan (BoJ) wind down its ultra-dovish, stimulus-heavy policies in 2024. In fact, BoJ Governor Kazuo Ueda on Thursday, emphasized the necessity of continuing the loose monetary policy in the near term and talked about options while moving away from negative interest rates. Ueda's comments reaffirmed market speculations about an imminent shift in the BoJ's policy stance. Apart from this, dovish Federal Reserve (Fed) expectations should cap the USD and act as a headwind.

Traders might also prefer to wait on the sidelines ahead of the release of the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. Investors will look for cues that the historically tight US labor market is loosening, which might force the Fed to start easing the monetary policy as early as March 2024. Nevertheless, the data will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the USD/JPY pair, which remains on track to register losses for the third straight week.

Daily Digest Market Movers: Japanese Yen slides to the lower end of its daily range against USD, lacks follow-through

The Japanese Yen recorded its biggest one-day rally against the US Dollar on Thursday in reaction to Bank of Japan Governor Kazuo Ueda's faintly hawkish messaging about ending the ultra-loose monetary policy.
Ueda pinned down the spring wage negotiations as the potential turning point on policy and told PM Kishida that the central bank hopes to see whether wages will rise sustainably and whether wage rises will push up service prices.
Ueda earlier said that they have not yet reached a situation in which they can achieve the price target sustainably, stably and with sufficient certainty, and noted that stimulus measures are supporting the Japanese economy.
The dismal domestic data released on Friday, showing that Japan's economy contracted by a 2.9% YoY pace in the third quarter, worse than the initial estimate of a 2.1% drop, lends some support to the USD/JPY pair on Friday.
On a quarterly basis, Japan's GDP shrank by 0.7% during the July-September period as compared to the 0.5% fall reported originally and a median forecast for a 0.5% decline.
The yield on the benchmark 10-year US government bond moves away from a three-month low and helps revive the US Dollar demand, assisting the USD/JPY pair to trim a part of Asian session losses.
Growing acceptance that the Federal Reserve is done raising interest rates and may start easing its policy by the first half of 2024 should cap the USD, warranting caution for the USD/JPY bulls.
Investors now look forward to the crucial US NFP report, which is expected to show that the economy added 180K jobs in November and the unemployment rate held steady at 3.9%, for some meaningful impetus.

Technical Analysis: USD/JPY struggle to capitalize on its goodish intraday recovery beyond the 144.00 mark

From a technical perspective, spot prices on Thursday showed some resilience below the 61.8% Fibonacci retracement level of the July-November rally and the very important 200-day Simple Moving Average (SMA). However, the USD/JPY pair, so far, has been struggling to find acceptance above the 144.00 round figure, which should now act as a key pivotal point for short-term traders. With the Relative Strength Index (RSI) on the daily chart flashing oversold conditions, a sustained strength beyond might trigger a short-covering rally and allow the USD/JPY pair to reclaim the 145.00 psychological mark.

On the flip side, the 143.00 mark now seems to protect the immedaite downside ahead of the Asian session low, around mid-142.00s, which coincides with the 61.8% Fibo. level. This is closely followed by the 200-day SMA, currently near the 142.30 region, the 142.00 mark and the 141.60 area, or the multi-month trough touched the previous day. Some follow-through selling will be seen as a fresh trigger for bearish traders and make the USD/JPY pair vulnerable to extend the downward trajectory further towards the 141.00 mark en route to the 140.80-140.75 zone.

Japanese Yen price today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the .

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.04%	0.16%	-0.11%	-0.23%	-0.21%	0.15%	-0.10%
EUR	-0.06%		0.11%	-0.17%	-0.29%	-0.28%	0.08%	-0.15%
GBP	-0.16%	-0.12%		-0.30%	-0.39%	-0.40%	-0.02%	-0.24%
CAD	0.11%	0.15%	0.28%		-0.12%	-0.03%	0.25%	0.00%
AUD	0.20%	0.28%	0.40%	0.10%		-0.01%	0.37%	0.16%
JPY	0.22%	0.29%	0.42%	0.10%	0.01%		0.42%	0.15%
NZD	-0.13%	-0.11%	0.02%	-0.25%	-0.38%	-0.39%		-0.22%
CHF	0.07%	0.10%	0.22%	-0.06%	-0.18%	-0.15%	0.20%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

United States Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

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