Japanese Yen eases from weekly high as USD stabilises before US NFP report

USD/JPY draws buying interest in Asian trading, but scope for gains appears restricted.
Falling US bond yields and hopes for diplomacy with Iran weigh on the USD.
Ahead of the critical US NFP release, a hawkish BoJ could underpin the JPY and restrain spot prices.

158.00 is back within reach for USD/JPY. The pair has edged towards that level over the past hour, recovering modestly from the 157.25 area, a fresh weekly low reached during Friday's Asian session. Spot prices appear to have ended a two-day decline. Further gains nevertheless look constrained, with traders potentially waiting for the crucial US monthly employment figures before taking new directional positions.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Market expectations for the US Federal Reserve's (Fed) policy trajectory will hinge heavily on the US Nonfarm Payrolls (NFP) report. Those expectations will, in turn, shape demand for the US Dollar (USD). Position adjustments ahead of this major data release are a key driver of the intraday USD/JPY rebound. However, subdued US Dollar (USD) trading and the fundamental backdrop suggest caution before taking aggressive bullish positions.

Expectations that US President Donald Trump would resume military strikes against Iran weakened following a decisive Democratic sweep in the US midterm elections. Crude oil prices consequently fell sharply, relieving inflation concerns and prompting traders to scale back bets on a December Fed rate increase. Meanwhile, a severe Wall Street sell-off sent investors into safe-haven assets. US bond yields dropped to their lowest level in nearly two months, limiting USD gains.

Hawkish expectations for the Bank of Japan (BoJ) could, by contrast, continue to underpin the Japanese Yen (JPY). Released on Thursday, the minutes of the September BoJ meeting showed agreement among policymakers that further increases in the policy interest rate and adjustments to monetary easing remained appropriate. This reinforces market expectations of a December rate rise, favouring JPY bulls and potentially restricting any substantial USD/JPY recovery.

USD/JPY: daily price chart

158.66 SMA Caps the Near-Term Technical Outlook

Below the 200-day Simple Moving Average (SMA) at 158.66, the near-term USD/JPY outlook remains slightly bearish. As long as the broader price structure stays beneath this key average, rallies are likely to attract sellers. A move back above that barrier would be needed to relieve downward pressure and allow a more constructive outlook.

Initial support could emerge at the daily swing low near 157.25, followed by 157.00. Below that lies the lower edge of the short-term trading range at around 156.60-156.50. A decisive break beneath this boundary would provide a fresh bearish signal, leaving USD/JPY exposed to further losses.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Nonfarm Payrolls: Key Questions

What do Nonfarm Payrolls measure?

Within the monthly jobs report published by the US Bureau of Labor Statistics, Nonfarm Payrolls (NFP) track the change in US employment over the previous month. This component excludes jobs in the farming industry.

How do Nonfarm Payrolls shape Federal Reserve policy decisions?

2% inflation and full employment form the Federal Reserve's mandate. By indicating how successfully the Fed is meeting that mandate, Nonfarm Payrolls can help shape its policy decisions. A comparatively strong NFP reading indicates that more people have jobs, earn more money and are therefore probably spending more. Conversely, a weak reading could suggest difficulty finding work. When low unemployment drives inflation higher, the Fed typically raises interest rates to counter it. When the labour market stagnates, it typically cuts rates to encourage activity.

What is the link between Nonfarm Payrolls and the US Dollar?

A stronger-than-expected payrolls reading tends to lift the US Dollar, while a weaker-than-expected result tends to weigh on it. This reflects the generally positive correlation between Nonfarm Payrolls and the USD. The relationship operates through inflation, monetary policy expectations and interest rates. Stronger NFP figures usually point towards tighter Federal Reserve policy, which supports the US Dollar.

How do payrolls figures influence Gold prices?

Gold prices generally move inversely to Nonfarm Payrolls. An above-forecast payrolls reading therefore tends to depress Gold prices, while a below-forecast result tends to have the opposite effect. Stronger NFP figures typically support the USD. Since Gold, like most major commodities, is priced in US Dollars, a stronger dollar means fewer dollars are needed to purchase an ounce of Gold. Higher interest rates, which stronger NFP figures typically encourage, also make Gold less attractive as an investment relative to holding cash, which at least earns interest.

Why can the market react unexpectedly to Nonfarm Payrolls?

Other elements of the broader jobs report can overshadow Nonfarm Payrolls, which represent just one component. For example, markets have sometimes overlooked the potentially inflationary implications of an above-forecast NFP reading when Average Weekly Earnings fell short of expectations. Instead, they have treated the earnings decline as deflationary. The Participation Rate and Average Weekly Hours can also shape the market response, although this occurs only in exceptional circumstances such as the “Great Resignation” or the Global Financial Crisis.