HomeNewsUSD/JPY Analysis Ahead of Non-Farm Payrolls
USD/JPY Analysis Ahead of Non-Farm Payrolls

USD/JPY Analysis Ahead of Non-Farm Payrolls

Last updated
Affiliate Disclosure

USD/JPY is trading slightly higher in quiet trade as the foreign exchange market counts down to today’s labor market data in the US.

All eyes are focused on the US Non-Farm Payrolls (NFP) release later today. The data is expected to show the US economy added 250k jobs in July. The forecast is sharply lower than June’s 381k number, adding to fears the US economy is on track for a hard landing.

The United States Gross Domestic Product (GDP) data for Q2 showed economic growth contracted for the second consecutive quarter. By definition, this means the US economy is in a technical recession. Subsequently, the dollar’s performance has been mixed in recent weeks.

For most of 2022, the greenback has been riding high against it’s peers. Last month, the US dollar index reached a two-decade high of 109.29. As a result, USD/JPY traded to it’s highest level since 1998.

Differing central bank monetary policy is undoubtedly, the driving force behind the dollar’s strength against the Japanese Yen . The Federal Open Market Committee (FOMC) has raised rates considerably to combat inflation. The Bank of Japan (BOJ) however, is adopting a different approach.

Last month, the fed raised rates by 75 basis points for the second time, bringing benchmark rates to 2.25% – 2.50%. In contrast, the short-term interest rate in Japan remains at -0.10%. As a result, capital is deserting the Yen in favor of the high-yielding greenback. That being said, the Yen has regained ground against the dollar recently as the economic outlook across the pond becomes less clear.

Dollar to Yen Outlook

From a technical standpoint, USD/JPY is in no-man’s-land. Currently, the pair is sandwiched between the 50-Day Moving Average (DMA) at 134.80 (green line) and the 100-DMA at 130.67 (blue line).

As long as the price remains between the support of the 100-DMA and the resistance of the 50-DMA the outlook is unclear.

A breach of either indicator will likely lead to a price extension. For that reason, traders are poised to trade the breakout in either direction.

USD/JPY should trade sideways until this afternoon’s data dump. However, should the numbers surprise, we can expect volatility to return in a big way.

USD/JPY Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.