The USD/JPY pair continues its downward trend for the third consecutive day, falling to the 143.00 neighborhood, marking a one-month low. This decline is primarily attributed to the contrasting policy expectations between the Bank of Japan (BoJ) and the Federal Reserve (Fed).
The JPY received a boost after domestic data revealed an increase in inflation-adjusted wages in Japan, signaling economic strength. BoJ officials have also hinted at a possible rate hike later this year, further strengthening the currency. On the other hand, the Fed is expected to cut interest rates in response to a weakening US labor market, leading to a bearish outlook for the USD.
Recent data, including a decrease in job openings and economic activity in the US, support the expectations of a Fed rate cut. This has caused US Treasury yields to drop, putting pressure on the USD. Additionally, concerns about a potential economic downturn have dampened investor sentiment, favoring the safe-haven JPY.
Looking ahead, key economic reports from the US, including the ADP employment report and Nonfarm Payrolls (NFP) report, will influence the USD/JPY pair. From a technical standpoint, a breach below the 143.00 level could lead to further downside towards the 142.00 mark, while a recovery above 144.00 may trigger a short-covering rally towards 145.00.
Technical Analysis
The USD/JPY pair’s recent drop below 144.00 confirms a bearish trend, with indicators signaling further downside potential. A break below 143.00 could push prices towards 142.30-142.25 support levels, while a recovery above 144.00 may lead to a move towards 145.00 and beyond.
USD/JPY 4-hour chart
