Japanese yen weakens as markets await US employment data

By RoboForex Analytical Department

The USD/JPY pair rose to 143.80 on  Friday, marking a second consecutive day of yen depreciation. The decline comes as traders adopt a wait-and-see stance ahead of a key report on US employment figures.

Market cautious ahead of NFP; political factors also in play

Investors are focused on the imminent US non-farm payrolls (NFP) report, which may influence expectations regarding the Federal Reserve’s next policy move. In the meantime, the market has turned cautious, favouring the US dollar.

Political developments have also contributed. US President Donald Trump and Chinese President Xi Jinping held a telephone conversation and agreed to continue trade negotiations. However, no concrete outcomes or details were disclosed, offering only limited clarity to the geopolitical picture.

Weak domestic data adds pressure on the yen

On the domestic front, Japan posted an unexpected decline in consumer spending for April. Household spending fell by 0.1% y/y, reversing the 1.4% growth in March and missing the 1.0% increase forecast. The drop highlights the impact of rising prices on domestic demand, adding to uncertainty over the pace of the Bank of Japan’s (BoJ) monetary tightening.

Nonetheless, BoJ Governor Kazuo Ueda reiterated that the central bank remains prepared to raise interest rates if the economic and inflation outlook warrants it. The BoJ continues to pursue a measured yet steady approach to policy normalisation.

Technical analysis of USD/JPY

On the H4 chart, USD/JPY continues to consolidate around 143.33. The current move is heading towards 144.23. A downward breakout from this range would pave the way for a decline to 142.20, with a possible extension to 140.50. Conversely, an upward breakout could trigger a bullish move towards 146.25. The MACD indicator supports this scenario, with its signal line below zero and pointing sharply upwards, indicating growing bullish potential.

On the H1 chart, the market is forming a broad consolidation range around 143.33. The structure features a completed growth wave to 143.96, followed by a correction (test from above) to 143.33. The next likely move is an upward push to 144.23, expected to occur today. This may then be followed by a decline to 142.20 and potentially further to 140.50. The Stochastic oscillator supports this setup, with its signal line above 50 and trending towards 80, indicating strong short-term buying pressure.

Conclusion

The yen remains under pressure amid cautious market positioning ahead of US labour data and lingering trade-related uncertainty. Meanwhile, weak Japanese spending data raises questions over the timing of the next BoJ rate hike. Technically, 144.23 is the next key resistance, while 142.20 and 140.50 serve as potential support levels in the event of a reversal. The market’s direction will likely hinge on the outcome of the US NFP report.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.