USDJPY – 30 Minute Chart – 090126
US Jobs Report: Key Near-Term Catalyst
Later on Friday, the highly anticipated US jobs report will influence expectations of a March Fed rate cut. Economists expect nonfarm payrolls to increase 60k in December after rising 64k in November, while forecasting unemployment to fall from 4.6% to 4.5% in December. Furthermore, economists forecast average hourly earnings to increase 3.6% YoY in December, up from 3.5% in November.
Weaker-than-expected labor market data would raise bets on a March Fed rate cut. A more dovish Fed rate path would weigh on demand for the US dollar, sending USD/JPY lower.
According to the CME FedWatch Tool, the chances of a March Fed rate cut fell from 43.2% on January 7 to 41.6% on January 8. Stronger-than-expected US Services PMI data tempered expectations of a March cut. The ISM Services PMI increased from 52.6 in November to 54.4 in December, signaling a robust US economy.
Today’s US jobs report will be key for the near-term USD/JPY price outlook. Fading bets on a March Fed rate cut would challenge the bearish short-term outlook and send USD/JPY higher.
However, expectations of BoJ rate hikes, a new Fed Chair potentially favoring lower rates, remain key drivers. These fundamentals support a bearish medium-term outlook for USD/JPY.
Technical Outlook: Key Levels to Watch
For USD/JPY price trends, traders should assess the technicals and closely monitor the fundamentals.
Viewing the daily chart, USD/JPY trades above its 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish bias. While technicals remain bullish, bearish fundamentals have evolved, countering the technicals.
A break below the 50-day EMA and the 155 support level would indicate a bearish near-term trend reversal, bringing the 200-day EMA into play. If breached, 150 would be the next key support level.
Crucially, a sustained drop below the 50-day and 200-day EMAs would reinforce the bearish medium-term price outlook.
AloJapan.com