USDJPY consolidates Friday’s strong recovery from a multi week low on weak USD demand.
The USDJPY pair struggles to profit on Friday’s good recovery from 144.45, its lowest level since August 11. And begins the new week on a sour note. Spot prices, on the other hand, manage to stay above the 146.00 level. At the start of the Asian session. And the fundamental backdrop remains favorable to optimistic traders.
The United States Dollar (USD) consolidates the post NFP strong advance up closer to the August monthly swing high. And proves to be a significant component that continues to serve as a tailwind for the USDJPY pair. The carefully watched monthly employment figures for the United States revealed that the economy gained 187K jobs in August. Above market estimates and the previous month’s downwardly revised total of 157K. In addition, the unemployment rate rose to 3.8% from 3.5% in July. While average hourly earnings fell to 4.3% from 4.4%. The report indicated a little worsening in the labor market. Ensuring that the Fed would keep rates steady at its September meeting. While markets are still factoring in the potential of one more 25 basis point Lift off is expected before the end of this year. This is regarded as supporting rising US Treasury bond rates and strengthening the Greenback.
The Fed-BoJ divergence remains a tailwind for the USDJPY, favoring optimistic traders.
The Japanese Yen (USDJPY) is held down by the fact that the Bank of Japan (BoJ) has showed. No evidence of changing its ultra-easy monetary policy stance. Indeed, BoJ board member Toyoaki Nakamura stated last week. That tightening monetary policy was premature since recent rises in inflation were mostly driven by increasing import costs rather. Than wage increases. Furthermore, Bank of Japan Governor Kazuo Ueda stated that underlying inflation remained slightly below the 2% target. Guaranteeing the status quo until next summer. This is a significant departure from previous major central banks, including the Fed. And argues that the USDJPY pair’s path of least resistance is to the upside. However, expectations that the Japanese government may interfere in the markets to support the home currency appear to be keeping a lid on any additional rises for the major.
Fear of intervention appear to be the sole element limiting the major’s upward potential.
Moving forward, no market-moving economic data is expected to be released on Monday. And US banks will be closed in honor of Labor Day. Bolstering possibilities for some near-term consolidation for the USDJPY pair. Nonetheless, the previously noted underlying background supports optimistic traders. As a result, any significant drop may still be viewed as a buying opportunity. And is more likely to remain confined, at least for the time being.
