Last week, we got series of mostly soft employment data from the US, which indicted that the labor market is cooling. The main event was Friday's jobs report which showed a moderation in wages growth, an increase in unemployment and although payroll gains of 187,000 beat estimates, they were one of the weakest in nearly three years.
The PCE report meanwhile showed an uptick in the persistent core inflation to 4.2% y/y in August and an acceleration 3.3% y/y in the all-inclusive measure, but markets did not appear particularly concerned. The releases overall bolstered expectations for a Fed pause later this month and enhanced market view that rates have peaked.
These news constrained the greenback and USD/JPY showed exhaustion around the September 2022 intervention levels (dashed line), snapping its four-week profitable streak. As such, there is risk for a breach of the EMA200 (at around 144.30) and daily closes below it could threaten the bullish bias, but strong catalyst would be needed for that.
Despite last week's lackluster performance, USD/JPY sustains its bullish bias. Japanese officials have refrained from supporting the Yen verbally, as they have done repeatedly in the recent past and the Bank of Japan has shown inclination to maintain the ultra-loose monetary stance. At the same time, the Fed has kept the door open to more hikes, as inflation is still high and the labor market tight, despite market optimism that the terminal rate has been reached. USD/JPY has room for higher highs and a test 148.83, but we are cautious at this point for further gains towards 152.20.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.