USD/JPY Eyes 144.50 on Household Spending and the US Jobs Report

Highlights

• The USD/JPY was down 0.05% to 143.983 this morning.
• Household spending figures from Japan will draw interest this morning, with a spike likely to fuel bets on a BoJ shift from ultra-loose.
• However, the US Jobs Report will likely have more impact in the afternoon session.

It is a relatively busy Friday session for the USD/JPY. Household spending numbers from Japan will draw interest this morning. A pickup in household spending could force the Bank of Japan to shift from its ultra-loose monetary policy stance.

Economists forecast household spending to increase by 0.5% in May versus a 1.3% decline in April. Year-over-year, economists expect household spending to fall by 2.4% versus 4.4% in April.

Away from the economic calendar, China-US trade-related news will also need consideration. However, intervention chatter will likely cap the upside for the USD/JPY.

The US Session

It is a big day ahead on the US economic calendar. The US Jobs Report will be in focus. A larger-than-expected increase in nonfarm payrolls and a pickup in wage growth would fuel further bets on a second consecutive rate hike in September.

Economists forecast nonfarm payrolls to increase by 225k and wages to rise by 4.2% year-over-year in June.

Following the ADP nonfarm employment change and ISM Non-Manufacturing PMI numbers, sentiment toward consecutive Fed interest rate hikes turned more hawkish.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 91.1% versus 90.5% on Wednesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 26.4%, up from 18.1% on Wednesday.

USD/JPY Price Action

Daily Chart

The Daily Chart showed a USD/JPY fall through the psychological 144 support level despite hawkish Fed bets. Significantly, the USD/JPY fell through the lower level of the 144.3 – 145.0 resistance band. However, the USD/JPY remained above the 50-day (140.251) and 200-day (136.298) EMAs, signaling bullish momentum over the near and long term.

Notably, the 50-day EMA continued to pull away from the 200-day EMA and reflected bullish momentum.

Looking at the 14-Daily RSI, the 64.59 reading signals a bullish outlook, suggesting another run at 145. A move through the lower level of the 144.3 – 145.0 resistance range should support a return to 145.

4-Hourly Chart

Looking at the 4-Hourly Chart, the USD/JPY faces strong resistance at the 144 psychological level. The USD/JPY remained above the 50-day (144.022) and 200-day (141.422) EMAs. Significantly, the 50-day EMA pulled further away from the 200-day EMA, signaling a run at the lower level of the resistance range of 144.3 – 145.0.

However, the 14-4H RSI reading of 43.56 indicates a bearish stance, with selling pressure outweighing buying pressure. An RSI move through 50 would align with the EMA and signal another run at 145.