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JPY/USD Outlook: Focus on US Labor Market and Fed

JPY/USD Outlook: Focus on US Labor Market and Fed

JPY/USD pair experienced on tuesday a substantial rally of 1.75%, effectively reversing the prior day’s decline of 0.36%. The session concluded with the USD/JPY pair settling at 151.666 after traversing a range from a low of 149.001 to a peak of 151.723.

The subsequent day, Wednesday, witnessed keen investor interest in the finalized private sector Purchasing Managers’ Index (PMI) data for October. The Jibun Bank Manufacturing PMI exhibited a marginal increase, progressing from 48.5 to 48.7, surpassing the preliminary estimate of 48.5. Regrettably, this upward revision had a limited impact on the Japanese Yen, notwithstanding the persistent contraction in the manufacturing sector.

Market sentiment became increasingly influenced by speculations surrounding potential interventions designed to strengthen the Yen. The Bank of Japan’s recent adjustments to its Yield Curve Control Policy had initiated a significant decline in the JPY/USD exchange rate. With the currency pair reaching the 151 threshold earlier in the week.

Nevertheless, the JPY/USD encountered initial headwinds attributed to economic measures implemented by the Japanese government aimed at bolstering its economy. Reports indicated that the Japanese government was actively crafting a ¥17 trillion package to mitigate the adverse effects of inflation on the nation’s economic landscape.

It is noteworthy that there are no forthcoming economic indicators scheduled for release from Japan later in the morning. Which renders the JPY/USD potentially susceptible to market speculations regarding interventions.

JPY/USD: US Labor Market Data Influence on Fed’s Rate Hike and USD Outlook

On the same day, investor focus will be directed toward the US ADP Nonfarm Employment Change. Also to JOLTS Job Openings data. Should these labor market indicators surpass expectations, they may have implications for the possibility of a Federal Reserve interest rate hike. Economists’ projections indicate an anticipated increase in employment of 150,000. That compared to the 89,000 reported for September in the case of ADP. Conversely, economists foresee a decline in JOLTS Job Openings from 9.61 million to 9.25 million for September.

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A tightening labor market typically fosters wage growth, subsequently propelling consumption and demand-driven inflation. An enduring uptrend in wage growth and consumer spending could potentially compel the Federal Reserve to adopt a more hawkish stance on interest rates. In such a scenario, an environment characterized by higher interest rates over an extended duration would impact borrowing costs and disposable income, potentially inducing consumers to curtail their spending. Thereby alleviating the pressure on the Federal Reserve to adopt a more hawkish stance.

These economic indicators will undoubtedly command attention. Still the focal point of the day will be the Federal Reserve’s interest rate decision and the ensuing press conference. Any indications of a hawkish disposition regarding interest rates from the Federal Reserve possess the potential to augment demand for the US dollar.

JPY/USD Technical Analysis: Bullish Momentum and Key Support Levels

A technical analysis of the situation reveals that the JPY/USD remains situated above both the 50-day and 200-day Exponential Moving Averages (EMAs). Thus reaffirming a bullish sentiment. A breach of the resistance level at 151.889 in the JPY/USD would lay the groundwork for a potential move towards the prevailing trend line. However, should the exchange rate descend below 151. As it may open the door to bearish momentum targeting the support level at 150.201 and the 50-day EMA. With heightened buying interest anticipated in proximity to the confluence of the 148.405 support level and the 50-day EMA.

The Relative Strength Index (RSI) over the past 14 days, currently registered at 63.08, implies that the JPY/USD could approach the resistance level at 151.889 before entering the overbought territory.

Source: FX Empire

Technical Analysis of USD/JPY and Market Signals

The JPY/USD maintains its position above both the 50-day and 200-day Exponential Moving Averages (EMAs). Thereby reinforcing a bullish sentiment in the price dynamics.

In the event of a breach above the formidable resistance level at 151.889 in the JPY/USD pair, it would substantially bolster the likelihood of an onward trajectory towards the prevailing trend line.

Conversely, a descent below the critical threshold of 151 has the potential to incite bearish market participants. Prompting their interest in targeting the support level situated at 150.201, in conjunction with the 50-day EMA.

The 14-period 4-hour Relative Strength Index (RSI), currently registering at 65.13, hints at a propensity for the JPY/USD to gravitate toward the aforementioned resistance level at 151.889, potentially culminating in an overbought market condition.

Source: FX Empire

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Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.


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