USD/JPY jumps after solid nonfarm payrolls release

USD/JPY has posted gains in the North American session after a solid showing from US nonfarm payrolls. Japan’s real wages continued to fall, while household spending rebounded.

In the North American session, USD/JPY is trading at 132.24, up 0.36% on the day.

US nonfarm payrolls within expectations

In the US, nonfarm payrolls was within expectations, easing concerns that the US labour market is in trouble. The economy added 236,000 new jobs in March, close to the market consensus of 240,000. This was a solid reading, although weaker than the February reading of 311,000. The unemployment rate remained at 5.0%, below the estimate of 5.1%. Wage growth eased to 4.2%, vs. 4.6% prior and 4.3% anticipated.

The US dollar posted gains against the majors after the release, after concerns that a soft reading might force the Fed to take a pause in its rate hikes.

BoJ digesting wage growth, household spending data

Japan’s real wages fell in February for the 11^th straight month, falling by 2.6%. Household purchasing power continues to drop, but this was an improvement over the -4.6% release in January, as government energy subsidies helped curb inflation. Household spending rose 1.6% in February, rebounding from -0.3% in January but well off the market consensus of 4.3%.

The Bank of Japan doesn’t meet until April 28th, but Governor Ueda will be under the magnifying glass, as he chairs his first meeting at the helm of the central bank. The economy is showing signs of improvement, with retail sales and industrial production accelerating in February. Inflation remains very low compared to other major economies but is still high for Japan. In February, CPI fell to 3.3%, down from 4.3% in January but above the BoJ target of 2%.

There has been considerable speculation that Ueda could shift policy and tweak or even abandon the Bank’s yield curve control policy. This move could have huge significance for the yen – when the BoJ widened the yield target band in December, the yen posted sharp gains. Ueda hasn’t revealed any cards about what he might do at his first meeting. He has toed the line of the previous Governor, Haruhiko Kuroda, that the BoJ won’t tighten until inflation is sustainable, and that would require higher wage growth. Wage growth has been falling, so any tightening moves such as raising interest rates do not appear imminent.

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USD/JPY Technical

• USD/JPY is testing resistance at 132.27. Above, there is resistance at 133.45
• 130.94 and 129.09 are providing support

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