USD/JPY Forex Technical Analysis – Weak NFP Figures Could Trigger Break into 127.227 – 126.362

The Dollar/Yen is trading nearly flat on Thursday as the greenback regained some of its footing ahead of a key U.S. non-farm payrolls report. The Forex pair had been under pressure since Wednesday after Federal Reserve Chair Jerome Powell said disinflationary pressures are underway in the economy, raising hopes that a pause to its monetary tightening streak is near.

At 06:10 GMT, the USD/JPY is trading 128.625, down 0.062 or -0.05%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $72.38, down $0.01 or -0.01%.

In today’s U.S. Non-Farm Payrolls report, due to be released at 13:30 GMT, analysts expect 185,000 jobs were added to the economy last month. This will be the lowest amount since January 2021. Analysts are also looking for the unemployment rate to edge up to 3.6%, and hourly wage inflation to stay flat at 0.3% on a monthly basis. The latter will indicate the strong labor market might have started to ease up.

Ahead of the report, futures market traders are pricing in another 25-basis point rate hike from the Fed at its March policy meeting, while implying that might be the end of its current tightening cycle. They have also priced in one rate cut by the end of this year, a move that Powell dismissed in his post-meeting press conference on Wednesday.

Daily USD/JPY Technical Analysis

The main trend is down according to the daily swing chart. A trade through 127.227 will reaffirm the downtrend. A move through 134.775 will change the main trend to up.

The minor trend is also down. A trade through 131.578 will change the minor trend to up. This will also shift momentum to the upside.

The nearest resistance is a series of minor pivots at 129.403, 130.050 and 131.001. The closest support is the May 24 main bottom at 126.362.

Daily USD/JPY Technical Forecast

Trader reaction to 128.867 is likely to determine the direction of the USD/JPY on Friday.

Bearish Scenario

A sustained move under 128.867 will indicate the presence of sellers. This could lead to a test of 127.227 and 126.362. The latter is a potential trigger point for an acceleration to the downside with 121.284 the next major target.

Bullish Scenario

A sustained move over 128.867 will signal the presence of buyers. This could lead to a labored rally with resistance layered at 129.403, 130.050 and 131.001. The USD/JPY will have to take out 131.578 in order to show any strength.

Side Notes

A weaker-than-expected U.S. Non-Farm Payrolls report will support the notion of an early exit by the Fed from its interest rate hiking cycle. This would be bearish for the USD/JPY.