Future USD/JPY movements will be shaped by high-impact economic data from both the U.S. and Japan, with particular attention to labor market reports and potential signals from the Bank of Japan regarding monetary policy.
Key Points
- USD/JPY fell yesterday due to positive Japanese wage data and PMI but recovered today due to bearish retail positioning.
- The focus is on upcoming US ADP employment data. A softer report could increase Fed rate cut expectations and support USD/JPY.
- Global risk sentiment and carry trade overshadow Japan’s positive wage and PMI data.
USD/JPY Daily Price Analysis – 05/06/2024
The USD/JPY pair closed at 154.896 yesterday, down from an open of 156.083, reflecting a 0.76% decline. Several factors influenced this decline, including the release of positive Japanese wage data. The Ministry of Health, Labour, and Welfare reported a 2.1% year-over-year increase in average cash earnings for April, surpassing expectations and indicating early signs of a virtuous cycle between wages and inflation. Additionally, the Jibun Bank Final Services PMI was revised higher to 53.8 for May, further supporting the yen.
Despite these positive indicators, the yen underperformed against other major currencies. This underperformance was attributed to the market’s broader focus on ‘carry’ trades and renewed investor interest in risk assets following the fall in the Mexican peso and other carry-trade favorites like the Indian rupee.
Today, the USD/JPY pair has significantly recovered, opening at 154.896 and trading at 156.124, marking a 0.80% increase. This rebound can be attributed to continued bearish sentiment among retail traders, with a substantial majority holding net-short positions. This bearish stance has intensified, suggesting a potential for continued USD/JPY gains from a contrarian perspective.
The market focuses on upcoming U.S. economic data, particularly the ADP private sector job survey, which is expected to show a modest slowdown in job creation to 175,000. This data release is crucial as it could influence Federal Reserve rate cut expectations, which have been supporting the USD amidst global monetary easing trends.
Key Economic Data and News to Be Released Today
Looking ahead, high-impact economic data from both the U.S. and Japan will be critical in shaping the USD/JPY pair’s trajectory. In the U.S., the ADP employment report and subsequent non-farm payroll (NFP) data will be closely monitored later in the week. A softer labor market report could heighten expectations for Fed rate cuts, potentially supporting further gains in the USD/JPY pair.
In Japan, while the positive wage and PMI data provide a favorable backdrop, the yen’s performance will largely depend on global risk sentiment and the dynamics of carry trades. Additionally, any signals from the Bank of Japan regarding its monetary policy stance will be crucial, especially given the ongoing discussions about the potential for higher interest rates if the inflation-wage cycle gains more traction.
USD/JPY Technical Analysis – 05/06/2024
The USD/JPY price action presents an interesting scenario today. The 15-minute chart below shows that the price has crossed over the 200 intraday moving average, suggesting that the market sentiment has turned bullish. However, the RSI tells a completely different story.
Judging by the RSI, the pair sits around an overbought region, interpreting the bullish movement as an exhausted retracement. This implies that the market may reverse and continue its bearish movement.
In this scenario, where our technical indicators provide conflicting signals, it’s important to give room for the market to breathe and form a clear direction before committing to a position.
USD/JPY Fibonacci Key Price Levels 05/06/2024
Short-term traders planning to invest in USD/JPY today should keep a close eye on the following key price levels for the day:
| Support | Resistance |
| 154.568 | 156.052 |
| 154.110 | 156.510 |
| 153.368 | 157.252 |
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
