USD/JPY Stagnates as Fed Rate Hike Expectations Persist

The Japanese yen continues to struggle against the U.S. dollar, reflected in the USD/JPY pair's recent lack of direction. Over the past three trading sessions, USD/JPY has fluctuated by just 0.4%, showing no clear trend and reinforcing a neutral bias. Despite the U.S. Nonfarm Payrolls (NFP) report indicating a significant slowdown in job growth, only 29,000 jobs added in September versus the expected 90,000, the yen has not gained strength against the dollar.

The NFP data renewed concerns about a potential U.S. economic slowdown, reducing expectations for a Federal Reserve rate hike in October to below 30%. However, markets still price in a 67% chance of a rate hike by December, keeping the U.S. dollar attractive. Higher U.S. Treasury yields, with 10-year yields above 5.3% and 30-year yields above 5.6%, continue to support the dollar's strength.

The yen's challenges stem from the interest-rate differential between the U.S. and Japan. While U.S. yields remain high, Japan's policy rate stays around 1.25%, with a 90% probability the Bank of Japan will keep rates unchanged in October. This gap limits the yen's ability to recover against the dollar.

Technically, USD/JPY is testing a long-term bearish trendline, with key resistance at 158.50 and support at 153.43. The MACD and RSI indicators suggest ongoing indecision, supporting the possibility of continued consolidation or a bullish breakout.