USD/JPY Struggles as Geopolitical Tensions Support Safe-Haven Demand
The USD/JPY pair is showing caution early this week, struggling to build on its modest rebound from last Friday’s dip below 157.00, which followed weaker-than-expected US employment data. The pair currently hovers around 157.70-157.75, confined within a narrow range held over the past week. The latest US Nonfarm Payrolls (NFP) report revealed only 29K jobs added in September, down from the revised 133K in August. The Unemployment Rate rose to 4.2%, and wage growth slowed to 3% YoY, reducing pressure on the Federal Reserve (Fed) to hike rates in October.
Analysts at ABN Amro described the NFP report as consistent with their outlook, noting that the three-month average job growth of 51K is solid but not indicative of a tight labor market. They argue that the softer employment data, combined with recent weak US PCE figures, lowers the urgency for a Fed rate hike this month. However, they still anticipate one more hike in December to curb inflation risks from energy shocks. Meanwhile, traders remain cautious, with the CME Group’s FedWatch Tool showing over an 80% chance of a rate hike by year-end.
Geopolitical tensions, particularly the Middle East conflict and escalating Russia-Ukraine war, are boosting demand for the safe-haven US Dollar (USD), providing some support to the USD/JPY pair. This revival of safe-haven demand is tempering aggressive bearish bets on the pair. Traders are also watching for potential Japanese Yen (JPY) intervention risks and divergent BoJ-Fed expectations, which could further influence the pair’s movements.
Technically, the USD/JPY pair maintains a constructive near-term bias above the 100-period Simple Moving Average (SMA) support at 156.72. Key resistance levels are noted at 158.00, 158.40, and 159.00, while support is found around 156.40-156.35. Investors will closely monitor the upcoming FOMC Minutes for further policy insights.