- For four consecutive trading sessions, the USD/JPY, the US dollar against the Japanese yen, was exposed to profit-taking selling operations that pushed it towards the support level of 149.18 before settling around the level of 149.55 at the beginning of this week’s trading.
- Recently, USD/JPY record gains reached the resistance level of 151.70, its highest level in a year, and we recommended Selling near that peak resulted in strong gains.
- Meanwhile, the Japanese yen remained weaker against the rest of the other major currencies, led by the US dollar, affected by the continued negative interest policy of the Central Bank of Japan.
Non-Farm Payrolls Data in Focus
On the other hand, the US Federal Reserve could not realistically hope for a better jobs report today, but it will need to be one of several positive economic reports over the coming months before it is ready to declare victory. However, the major US non-farm payrolls failure as well as the -101,000 net revision were significant, and policymakers hope it is a sign of things to come rather than just a blip in the data. Also, we have seen the Labor market slow down a little but not enough yet and this may be a sign of that acceleration.
Graphically, average hourly earnings figures were also very positive, with the monthly figure at 0.2% the second such figure in three months. What would have been the third was instead revised to 0.3%, but even then, this is a very encouraging three months of wages numbers that will give the Fed hope that wages will be roughly sustainable with 2% inflation.
On another level, today's services PMIs collectively painted a picture of consumers feeling distressed after two years of inflation and rapidly rising interest rates. Moreover, pandemic savings cushioned the blow at the time and hampered the US central bank's ability to curb inflationary pressures, but they appear to provide less protection now, which could weigh on economic activity further, if surveys are to be believed.
Last Friday, non-farm payrolls data in the United States of America for October came in below expectations, with 150,000 jobs recorded versus expectations of 180,000 jobs. For the moment, the country's unemployment rate for the month also missed expectations of 3.8% with a growth rate of 3.9%, while average hourly wage growth exceeded expectations (on an annual basis) of 4% with a growth rate of 4.1%. finally, The Labor force participation rate fell slightly to 62.7% from 62.8% in September.
In Japan, the monetary base in October rose by 9%, compared to the expected growth rate of 5.9% (on an annual basis). The Jibun Bank Manufacturing PMI for the month also beat expectations of 48.5 with a reading of 48.8. Earlier in the same week, Japanese retail sales for September beat expectations (y/y) of 5.9% with a change of 5.8%. also, The country's unemployment rate fell to 2.6% from 2.7% in August, in line with estimates.
USD/JPY Outlook
USD/JPY has now declined, trading several levels below the 100-hour moving average line. As a result, the currency pair fell to the oversold levels of the 14-hour RSI. In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a descending channel. The MACD indicator for this period also appears to be supporting the downtrend after completing the bearish crossover. Therefore, the bears will look to extend the current pullbacks towards 148.94 or lower to the 148.49 support. On the other hand, the bulls - the bulls - will target short-term profits at around 149.77 or higher at the 150.22 resistance.
In the long term, and according to the performance on the daily chart, it appears that the USD/JPY currency pair is trading within an upward channel. However, the daily MACD appears to be having difficulties gaining momentum after completing a bullish crossover. Therefore, the bears will target potential pullbacks at around 147.17 or lower at the 144.81 support. On the other hand, the bulls will be looking to pounce on profits at around 151.64 or higher at the 154.08 resistance.
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