USD/JPY calm ahead of US nonfarm payrolls

The Japanese yen has extended its gains on Friday. USD/JPY is trading at 153.26, down 0.27% at the time of writing.

It has been a week to remember as the yen has soared 3.2% against the dollar. The yen fell below the 160 level earlier in the week, setting another 34-year record. However, the Japan’s Ministry of Finance finally stepped in and intervened on Monday and Wednesday, based on Bank of Japan data. These moves have shored up the ailing yen, although previous interventions were unable to stop the yen’s descent.

The yen had been on a sharp descent before this week’s wild swings and was down over 10% since the start of the year. Last week’s BoJ meeting didn’t provide any support to the yen as the central bank maintained interest rates around zero.

Did traders miss hawkish signals from the meeting? The BoJ issued its quarterly report at the meeting and projected that inflation would be at a “level generally consistent” with its target of 2% sustainable inflation by late 2025. As well, the report said the BoJ would “adjust the degree of monetary accommodation”, which could be code for rate hikes, if the economic data and inflation meet forecasts.

The BoJ tends not to be transparent with its plans and the lack of communication may have come back to bite at the meeting, as the Bank failed to make clear that further rate hikes were on the table. Instead, the yen kept dropping, triggering this week’s dramatic interventions.

Will nonfarm payrolls remain strong?

US nonfarm payrolls are unlikely to match last month’s blowout of 303,000, but the markets are expecting strong job growth to continue. The April market estimate stands at 243,000. Wage growth, which is carefully monitored as it contributes to inflation, is expected to remain unchanged at 0.3% m/m in April. The employment report often has a significant impact on the US dollar and should be treated as a market-mover.

USD/JPY Technical

• USD/JPY faces resistance at 154.33 and 155.60
• There is support at 152.37 and 151.10

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