Forex world

May 05, 2023

USD/JPY prints four-day downtrend below 134.00

- USD/JPY takes offers to refresh intraday low, fades late Thursday’s bounce off weekly bottom.

- Market positions for US NFP amid mixed signals, dovish Fed clues also weigh on Yen pair.

- Japan’s holidays fail to prod USD/JPY bears amid bank turmoil, looming US debt ceiling expiration.

USD/JPY drops for the fourth consecutive day as bears approach the weekly low during early Friday, down 0.30% intraday near 133.85 by the press time. In doing so, the Yen pair renews its intraday bottom as it cheers the US Dollar weakness ahead of the key US employment report for April. It’s worth noting that Japan’s holidays fail to challenge the sellers.

US Dollar Index (DXY) takes offers to reverse the previous day’s corrective bounce off a one-week low near 101.15 by the press time. With this, the greenback’s gauge versus six major currencies portrays the market’s conviction that the Federal Reserve (Fed) is well-set for policy pivot, especially after recently mixed US data and Fed meeting. While portraying the same, the Fed Fund Futures hint at increasing odds of the rate cut in late 2023.

That said, preliminary readings of the US Nonfarm Productivity and Unit Labor Cost for the first quarter (Q1) of 2023 came in mixed. That said, Nonfarm Productivity dropped to -2.7% in Q1 from 1.6% prior and -1.8% market forecasts whereas the Unit Labor Cost jumped to 6.3% versus 5.5% expected and 3.3% prior. Further, the US Goods and Services Trade Balance improved to $-64.2B from $-70.6B prior and the $-63.3B market forecast. Further, Initial Jobless Claims edge higher to 242K for the week ended on April 28 versus 240K expected and 229K in previous readings.

Apart from the Fed’s dovish hike and mixed US data, US banking sector woes join looming default fears to challenge the market sentiment and weigh on the USD/JPY price.

Though, recent actions from the US policymakers and comments suggesting no immediate fears of the banking crisis seem to exert downside pressure on the US Dollar.

Against this backdrop, S&P 500 Futures snap a four-day downtrend with mild gains.

Alternatively, the Bank of Japan’s (BoJ) dovish bias and upbeat early signals of the US jobs report challenge the USD/JPY bears.

Looking forward, holidays in Japan and a light calendar elsewhere can restrict USD/JPY moves ahead of the US employment report. However, downbeat expectations from the scheduled data raise fears of a positive surprise and wild US Dollar move to pare weekly losses. Forecasts suggest downbeat prints of the headline US Nonfarm Payrolls (NFP), expected 179K versus 236K prior.

Technical analysis

Even if a clear downside break of a six-week-old support line, now immediate resistance near 134.70, favors USD/JPY bears, the 50-DMA prods intraday sellers around 133.85.


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