Yen holds own against dollar, NFP next

The yen has been steady for most of the week and is hovering around the 148 line. In the North American session, USD/JPY is trading at 148.09, up 0.12%.

Yen yawns after Fed rate hike

The Federal Reserve’s rate meeting roiled the financial markets and sent the US dollar sharply higher against the majors, but the Japanese yen defied the trend and has held its ground. The recent interventions by Japan’s Ministry of Finance (MOF) appear to have chilled the appetite of speculators to test the yen, as the MOF may have drawn its ‘line in the sand’ at the 150 level. Still, USD/JPY has been on a prolonged descent, losing 22% of its value this year, and I would not be surprised to see the yen resume its downturn shortly.

The Bank of Japan has shown time and time again that it is committed to an ultra-loose policy in order to support the economy, and has no interest in throwing a lifeline to the struggling yen, even with inflation rising. The US/Japan rate differential, which continues to widen, will weigh heavily on the yen, and unilateral currency interventions are unlikely to stem this downturn.

After the dramatic FOMC meeting, the US nonfarm payroll report, which will be released on Friday, is almost a footnote. The consensus stands at a modest 200,000 new jobs for October, below the 263,000 reading in September. Investors will be keeping a close eye on wage growth, which came in at a strong 5.0% in September and is expected to drop to 4.7%. With the December rate hike currently a toss-up between 0.50% and 0.75%, a stronger-than-expected NFP would raise the likelihood of a 0.75% and boost the dollar. Conversely, a soft reading would reinforce expectations of the Fed easing to 0.50%, which would be bearish for the dollar.

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USD/JPY Technical

• USD/JPY is testing resistance at 148.08. Above, there is resistance at 149.76
• 147.43 and 145.16 are providing support

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