Last Friday's NFP report surpassed expectations once again, extending its record streak to 14. However, the report's details were less impressive. Notably, the unemployment rate experienced its largest month-to-month increase since the pandemic, rising from 3.4% to 3.7%. Additionally, the average number of hours worked per week decreased slightly, which is often an indication that employers are reducing hours before resorting to layoffs.
Overall, the report provided mixed signals that catered to different perspectives. Optimists viewed the solid job growth positively and saw the higher unemployment rate and the soft average hourly earnings as signs of decreased labour market tightness that could alleviate inflationary pressures. Meanwhile, pessimists focused more on the report's details rather than the headline number, emphasizing the significance of trends over absolute figures.
The US ISM Services PMI came out well below expectations at 50.3, barely avoiding contractionary territory. The employment sub-index slipped into contraction, and the prices paid sub-index decreased substantially, returning to levels last seen in May 2020. As a result, the market further priced out hawkish bets on Fed’s hikes.
BoJ’s Ueda repeated that they should continue with QQE until the inflation target is achieved. Japan struggled with a deflationary mindset for decades, so the central bank doesn’t seem to be too much concerned about higher inflation as the other advanced economies.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, the USDJPY seems to be pulling back into the 138.16 support level where we can find also the red 21 moving average for further confluence. The target for the buyers at the moment is the 142.17 resistance where we can also see a 61.8% Fibonacci retracement level from the entire down move since October of last year. We will likely find buyers on the 138.16 level if the price gets there, while the sellers will wait at the 142.17 high.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, the price action has become a bit choppy lately as the market can’t find clarity amid recent economic data. We can see that at 138.16 support we have also the 38.2% Fibonacci retracement level for further confluence. We may see the price falling into that support and find buyers leaning on it targeting the 142.17 resistance.
If USDJPY falls through that support level, the next one is at the upward trendline where we can also find the 61.8% Fibonacci retracement level. That’s likely to be the last line of defence for the buyers as the trend is likely to switch to the downside in case the price falls through it.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that USDJPY is finding support at the 139.00 handle in what could end up being a double bottom. The recent price action has been a bit confusing given that the data hasn’t been good, and the market priced out hawkish expectations for the June meeting. In such instances, you would expect USD/JPY to fall, but it started to basically range. Nevertheless, we have two levels to watch here:
- If the price breaks below the 139.00 handle, we can expect sellers piling in and extending the fall into the 138.16 support, if not lower.
- If the price breaks above the 140.00 handle, we should see the buyers jumping onboard and extending the rally towards the 142.17 resistance.
