USD/JPY Forex Technical Analysis – Strong US Non-Farm Job Growth Could Spike Price Higher

The Dollar/Yen is trading lower early Friday as the greenback takes a breather following a robust two-day surge.  The move is helping to alleviate some pressure from the U.S. Federal Reserve’s hawkish policy narrative. Traders could also be squaring positions ahead of today’s U.S. Non-Farm Payrolls report.

There is also speculation that China could relax anti-COVID restrictions, which have been hobbling economic activity. This is helping to reduce the U.S. Dollar’s appeal as a safe-haven asset.

The overall price action in the Dollar/Yen has been relatively more subdued this week on concerns about further intervention from Japanese authorities.

Finance Minister Shunichi Suzuki said that Japan’s currency interventions have been stealth operations in order to maximize the effects of its forays into the market, with the government having spent a record $43 billion supporting the Yen last month.

At 10:00 GMT, the USD/JPY is trading 147.802, down 0.463 or -0.31%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $62.99, down $0.17 or -0.26%.

US Labor Market Data on Tap

USD/JPY investors were turning their attention to key U.S. jobs data due at 12:30 GMT, with economists polled by Reuters expecting Non-Farm payrolls to show an increase of 197,000 jobs in October.

An upside surprise in the headline number or a downside surprise in the unemployment rate would reinforce the Fed’s higher terminal rate posture and keep the U.S. Dollar bid, but a softer headline print can weigh on the dollar. A jump in the unemployment rate could also have the same effect.

A higher peak in U.S. rates also spells more pain for the Japanese yen, which has been a victim of widening interest rate differentials as a result of the Bank of Japan’s dovishness.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending lower. A trade through 148.849 will signal a resumption of the uptrend and shift momentum to the upside. The main trend will change to down on a trade through 145.113.

The short-term range is 151.945 to 145.113. Its 50% level at 148.529 is currently being tested.

The main range is 140.353 to 151.945. Its 50% level at 146.149 is the nearest support. Additional support comes in at 143.913.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 148.529 is likely to determine the direction of the USD/JPY on Friday.

Bullish Scenario

A sustained move over 148.529 will indicate the presence of buyers. Taking out 148.849 will indicate the buying is getting stronger. This could trigger an acceleration to the upside since the resistance doesn’t come in until 151.945.

Bearish Scenario

A sustained move under 148.529 will signal the presence of sellers. If this creates enough downside momentum then look for a break into the pivot at 146.149. If this fails then look for a move into 145.113. A trade through this level could extend the selling into 143.913.