USD/JPY eyes US Nonfarm Payrolls

USD/JPY has been hovering close to the 145 line most of the week, and the trend has continued today. In the European session, USD/JPY is trading at 144.81, down 0.21%.

The US releases nonfarm payrolls later today. The release once received massive coverage and was usually a market-move, but the new era of high inflation and global tightening has stolen much of NFP’s thunder. Still, the indicator is an important bellwether of the health of the US economy and could provide insights into future rate moves from the Federal Reserve.

The consensus for the September nonfarm payrolls stands at  250,000, lower than the 315,000 recorded in August. The US labour market has been very robust, and investor reaction will likely be muted if the consensus is not wide of the mark. The markets will be more focussed on hourly earnings and the participation rate – soft readings would raise speculation that the Fed could ease up sooner rather than later, which would be bearish for the US dollar. Conversely, hot readings would support the Fed remaining hawkish, which would give the US dollar a boost.

Will the Ministry of Finance intervene again?

Japan will also be keeping a close eye on today’s US jobs reports. The Ministry of Finance (MOF) has shown that is willing to intervene to prop up the Japanese yen, and a stronger-than-expected NFP could be the trigger for another round of intervention. Since the dramatic intervention on September 22nd, the yen has moved only slightly above the 145 level, which could well be a ‘line in the sand’ for the MOF.  The MOF intervention, which was meant as a warning against speculators, likely cost 2.84 trillion yen. The move led to Japan’s foreign currency reserves falling to their lowest level since 2017. With the Bank of Japan capping JGB yields and the Fed continuing to deliver oversize rate hikes, the US/Japan rate differential is widening, which means the yen will likely continue to lose ground, barring another currency intervention by the MOF.

USD/JPY technical

• There is resistance at 145.36 and 145.97.

• USD/JPY has support at 144.29 and 143.68.