USD/JPY churns near 145.00 in post-NFP turbulence, set to end Friday where it started

• USD/JPY touched 146.00 in the pre-NFP market runup before slumping back.
• Yen set for another significant down week, falling a full percent against most major currencies.
• Broad-base JPY selling to dominate market themes as Yen pairs rebalance recent losses.

The USD/JPY spiked to a near-term high at the 146.00 handle early Friday in the broad-market run-up to the US Nonfarm Payrolls release, which surged above market forecasts and sent the US Dollar (USD) back down against the Japanese Yen (JPY) as markets weighed odds of Federal Reserve (Fed) rate cuts in the face of a still-firm US labor market.

US Average Hourly Earnings for the year ended in December climbed to 4.1% compared to November’s 4.0% print, climbing over the market forecast of a slight decline to 3.9%, and the NFP showed the US added 216K net jobs to the economy in December, well above the market’s expected print of 170K. December’s NFP print came in at a three-month high, though revisions can be expected in the coming months with November’s final print getting revised down from 199K and October seeing a second set of revisions bringing the total down from 150K to 105K.

With the US labor market continuing to show more strength than investors were expecting or hoping for, odds of a sooner rather than later rate cut from the Fed are diminishing, and money markets are now pricing in a 60% chance of a March rate cut, compared to around 90% as recently as December.

Next week kicks off with a fresh reading of Japan’s Tokyo Consumer Price Index (CPI), and investors will be keeping a close watch on Japan inflation figures as markets continue to look for signs of the Bank of Japan (BoJ) getting pushed out of its deeply-entrenched hyper easy monetary policy hole.

Japan’s Tokyo CPI last printed at 2.6% for the year ended December, a 12-month low after headline inflation in Japan reached 4.4% in January of 2023. Despite the rapid and steady decline in inflation, the BoJ has taken a widely opposite stance of most major central banks, and is overwhelmingly concerned about inflation falling too fast, too far below the BoJ’s target of 2%, with the Japanese central bank worried about inflation lagging below their minimum target some time in 2025.

Core Tokyo CPI (headline inflation less Fresh Food prices) is forecast to slip from 2.3% to 2.1% for the year through December.

USD/JPY Technical Outlook

Friday made a mess of the USD/JPY intraday charts after the post-NFP plunge, tapping 146.00 and dipping below 144.00 before settling the day close to where it started near 144.50.

Steady Yen selling has seen the USD/JPY climb through the first week of 2024, and the pair is up a little over 3% from December’s swing low of 140.25.

The USD/JPY closed in the green for three straight trading days this week, rebounding into the top side of the 200-day Simple Moving Average (SMA) as technical indicators lift from oversold conditions. The pair remains down nearly 5% from November’s peak bids near 151.90, and USD/JPY bulls will find an immediate technical ceiling at the 50-day SMA descending through 147.00.

USD/JPY Hourly Chart

USD/JPY Daily Chart

USD/JPY Technical Levels

USD/JPY