The USD/JPY pair experienced a remarkable surge, gaining nearly 2% ahead of the highly anticipated Non-Farm Payroll (NFP) report. This move followed dovish comments from the Bank of Japan (BOJ) and strong US employment data. Traders were reassessing their expectations, and the combination of these factors made USD/JPY rise sharply. The BOJ’s cautious approach to interest rate hikes continues to influence the market, adding further volatility to the yen.
BOJ Governor Ueda recently informed Prime Minister Ishida that the central bank would move cautiously regarding any rate hikes. This has diminished market hype after the election of the more hawkish prime minister last week. The markets remain unstable, as Ueda mentioned, leading to no immediate changes in BOJ policy. This cautionary stance provided additional support to USD/JPY buyers.
Meanwhile, the US labor market also contributed to the USD/JPY rally. The latest ADP payroll report showed that 143,000 jobs were added in September, exceeding expectations by 19,000. This marked a significant improvement compared to August’s numbers and pointed to a firmer labor market ahead of the upcoming NFP report. FOMC member Barkin’s comments on inflation also signaled that the process of returning to the 2% target might take longer than expected. This, in turn, limited the pace at which interest rates could be reduced.
This dovish twist from the BOJ, combined with strong US employment data, gave USD/JPY its best day since June 2022. Across other yen pairs, bullish candles appeared, with GBP/JPY, EUR/JPY, and NZD/JPY following similar trends. For the first time in two months, AUD/JPY closed above 100, while CHF/JPY came close to breaking above its September high.
Technically, USD/JPY continues to demonstrate bullish momentum. The pair formed a bullish divergence on the daily chart before breaking past key resistance at 140. With the Relative Strength Index (RSI) now above 50, the bullish momentum is confirmed, and price action reflects a strong rally.
USD/JPY could target the 149 level if wave equality materializes. This would align with the pair's current technical setup, nearing key moving averages. However, risks remain, particularly if incoming US data underperforms. In such a case, the BOJ may grant higher prices, benefiting those looking to buy on dips.
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USD/JPY surges nearly 2% as dovish BOJ comments and strong US jobs data drive the rally. Find out the latest technical outlook and analysis.
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