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USD/JPY advanced on Friday (+0.22% to 151.60), inching closer to horizontal resistance at 152.00 after strong U.S. jobs data boosted U.S. Treasury yields across the curve. For context, the latest employment report showed that U.S. employers added 303,000 workers in March, well ahead of estimates of 200,000 payrolls – a sign that the U.S. labor market is still firing on all cylinders.
Strong hiring momentum, coupled with solid wage growth, may force the Fed to delay the start of its easing cycle, possibly until the third or even fourth quarter, to prevent inflationary pressures from reaccelerating sharply. The possibility that interest rates will remain higher for longer in the U.S. should be a tailwind for the U.S. dollar, keeping it biased to the upside in the near term.
While the greenback may have room to gain additional ground against some of its major peers, it is uncertain whether it can continue to appreciate relentlessly against the yen, as Japanese authorities have stepped up verbal intervention in recent days whenever the USD/JPY exchange rate flirted with breaching the 152.00-point threshold. This may be the line in the sand for Tokyo.
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Focusing on techincal analysis, USD/JPY has traded within a narrow range over the past two weeks, with prices bouncing between resistance near 152.00 and support at 150.90, indicating market consolidation, signaling a phase of consolidation may be underway.
In terms of possible scenarios, a drop below 150.90 can open the door for a pullback towards 50-day simple moving average at 149.75. On further weakness, attention may shift towards channel support at 148.85. On the flip side, a decisive bullish breakout could usher in a rally towards 155.25, provided that the Japanese government refrains from intervening and allows market to self-adjust. However, such an outcome appears unlikely.
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| Change in | Longs | Shorts | OI |
| Daily | -12% | -4% | -5% |
| Weekly | -7% | -1% | -2% |
USD/JPY TECHNICAL CHART
USD/JPY Chart Created Using TradingView