USD/JPY Eyes Sub-141 on FOMC Member Reactions to the Jobs Report

Highlights

• The USD/JPY suffered a third consecutive loss on Monday, ending the session at 141.309 on Fed chatter.
• There are no economic indicators from Japan or the US to influence today, leaving Fed chatter in focus.
• This morning, the USD/JPY was flat at 141.325.

It is a relatively quiet Tuesday session for the USD/JPY. There are no economic indicators from Japan to draw interest this morning. The lack of economic indicators will leave FOMC member commentary from Monday to resonate.

Despite the market reaction to the US Jobs Report and Fed chatter, monetary policy divergence favors the dollar. However, intervention chatter continues to influence sentiment toward the USD/JPY.

The US Session

It is a quiet day on the US economic calendar, with no US economic indicators to provide direction. The quiet economic calendar will leave FOMC member commentary in focus, with FOMC member Bullard on the calendar to speak today.

FOMC members Barr, Bostic, and Daly weighed on the dollar, announcing the Fed monetary policy tightening cycle is nearing its end.

FOMC Member Mary Daly reportedly favored two further rate hikes this year but added,

“While the risks of doing too little are still greater than those of overdoing it on rate hikes, the two sides are getting into better balance as the Fed nears the last part of its hiking cycle.”

FOMC member Michael Barr noted that he thinks the Fed is close, with Raphael Bostic erring on the side of patience.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 92.4% versus 93.0% on Friday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 23.1%, down from 24.2% on Friday.

USD/JPY Price Action

Daily Chart

The Daily Chart showed a USD/JPY fall through the psychological 142 and the upper level of the 141.9 – 141.2 support band to test support at 141.2. However, despite the Monday loss, the USD/JPY remained above the 50-day (140.355) and 200-day (136.379) 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 45.25 reading signals a moderately bearish outlook, suggesting a fall through the lower level of the support band. A fall through the lower level of the 141.9 – 141.2 support band would bring the 50-day EMA (140.355) into play.

4-Hourly Chart

Looking at the 4-Hourly Chart, the USD/JPY finds support at the lower level of the 141.9 – 141.2 support band. The USD/JPY remained below the 50-day (143.361) and 200-day (141.528) EMAs, sending bearish signals. Significantly, the 50-day EMA narrowed to the 200-day EMA, signaling a fall through the lower level of the 141.9 – 141.2 support band to target sub-141.

The 14-4H RSI reading of 27.50 indicates oversold territory. The RSI aligned with the 50-day EMA, signaling a fall through the support band to target sub-141.