USD/JPY Forecast: The US Jobs Report and a Drop Below 145

Highlights

• The USD/JPY fell by 0.31% on Thursday, ending the session at 146.413.
• US labor market data left the USD/JPY in negative territory for the second consecutive session.
• On Friday, Bank of Japan commentary and the US Jobs Report warrant investor attention.

USD/JPY Movement on Thursday

The USD/JPY fell by 0.31% on Thursday. Following a 0.50% loss on Wednesday, the USD/JPY ended the day at 146.413. The USD/JPY rose to a session high of 147.112 before falling to a Thursday low of 145.891.

Bank of Japan and the Pivot from Negative Rates

On Friday, investors must consider Bank of Japan comments about inflation, wages, and negative interest rates. On Wednesday, the BoJ Summary of Opinions signaled a more decisive BoJ, with plans forming to exit negative interest rates.

Significantly, the BoJ reported firms having concerns about labor shortages and having favorable views towards wage growth. The BoJ was also optimistic about a move to the 2% inflation target.

However, Spring wage growth negotiations remain pivotal for the BoJ and a departure from ultra-loose monetary policy.

Hawkish forward guidance about wage growth, inflation, and interest rates could impact buyer appetite for the USD/JPY.

There are no economic indicators from Japan for investors to consider on Friday.

US Economic Calendar: The US Jobs Report

On Friday, the US Jobs Report will garner investor attention. Following weaker-than-expected labor market indicators, the US Jobs Report could impact investor bets on a March Fed rate cut.

Economists forecast nonfarm payrolls to increase by 180k in January after rising by 216k in December. Significantly, economists expect the unemployment rate to increase from 3.7% to 3.8% and average hourly earnings to rise by 0.3%. In December, average hourly earnings increased by 0.4%.

Weaker labor market conditions could impact wage growth and reduce disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation. A softer inflation outlook could adjust bets on a March Fed rate cut.

Other stats include finalized Michigan Consumer Sentiment and factory orders. However, these will likely play second fiddle to the US Jobs Report.

Short-term Forecast

Near-term trends for the USD/JPY remain hinged on US labor market data and BoJ chatter. Weaker US labor market conditions could refuel bets on a Fed rate cut. The Fed and the Bank of Japan remain focused on wage growth. Recent forward guidance and economic indicators tilt monetary policy divergence toward the Japanese Yen.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY break above the 146.649 resistance level would support a move toward the 148.405 resistance level.

On Friday, Bank of Japan chatter and the US Jobs Report need consideration.

However, a break below the 50-day EMA would give the bears a run at the 144.713 support level.

The 14-day RSI at 50.71 indicates a USD/JPY move to the 148.405 resistance level before entering overbought territory.

4-Hourly Chart

The USD/JPY sat below the 50-day EMA while remaining above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

A USD/JPY break above the 146.649 resistance level would give the bulls a run at the 50-day EMA.

However, a break below the 200-day EMA would bring the 144.713 support level into play.

The 14-period 4-hour RSI at 38.05 indicates a USD/JPY drop below the 146 handle before entering oversold territory.