USD/JPY Stalls After Weak US Jobs Data, Fed Hike Pressure Eases
The USD/JPY pair is off to a quiet start this week, unable to sustain the modest rebound from last Friday’s dip below 157.00. This drop followed weaker-than-expected US employment data, but the pair remains stuck in a familiar range, trading around 157.70-157.75.
The US Nonfarm Payrolls (NFP) report revealed only 29,000 jobs added in September, down from a revised 133,000 in August. The Unemployment Rate rose to 4.2%, and wage growth slowed to 3% year-over-year. This weak data, combined with soft US PCE figures, has reduced pressure on the Federal Reserve to raise interest rates in October.
Analysts at ABN Amro described the labor market report as “consistent with our base case,” noting that the three-month average of 51,000 jobs added is solid but does not indicate a tight market. They believe the softer employment data, alongside the recent PCE report, removes the urgency for a Fed rate hike this month. However, they still expect one more hike in December to combat energy-driven inflation.
Despite the softer US data, traders are still pricing in an over 80% chance of a Fed rate hike by year-end, according to the CME Group’s FedWatch Tool. Meanwhile, the Japanese Yen faces headwinds from expectations of another BoJ rate hike in October and potential intervention risks. Geopolitical tensions in the Middle East and the Russia-Ukraine conflict are also boosting demand for the safe-haven US Dollar, providing some support to USD/JPY.
Technically, the USD/JPY pair remains bullish above the 100-period Simple Moving Average support at 156.72. A corrective pullback could find buyers defending the 156.40-156.35 zone. On the upside, resistance is seen near 158.00, with further hurdles at 158.40 and 159.00.