USD/JPY Consolidates Ahead of Crucial NFP Release

The US dollar (USD) and Japanese yen (JPY) exchange rate has been consolidating near 155.75 as traders await the September Nonfarm Payrolls (NFP) release, which will provide insight into the Federal Reserve's next monetary policy move.

Federal Reserve Governor Christopher Waller recently stated that inflation shows signs of cooling, causing US bond yields to fall and pushing the US dollar to an over one-week low. This has put pressure on the USD/JPY pair, keeping it under pressure despite its proximity to the August swing low.

The Japanese yen, however, is receiving support from a more hawkish repricing of Bank of Japan rate expectations. Markets now fully price in a 25 basis point rise at the upcoming September BoJ meeting and anticipate another move in December after board member Hajime Takata called for a more nimble approach.

Technically, a break below 155.25-155.20 could trigger further selling, opening up 155.00 as a potential target. On the other hand, a sustained move above the 200-period simple moving average and 160.00 would ease pressure on the pair.