USD/JPY Holds Range as Jobs Data Clash With Haven Flows

Key Moments

Dollar-Yen Starts the Week Muted After Post-NFP Rebound

The USD/JPY pair begins the new week on a quiet footing, unable to build meaningfully on Friday’s limited recovery from levels below 157.00 that followed weaker U.S. labor market data. The exchange rate remains locked in the trading band seen for roughly the past week and is currently fluctuating around the 157.70-157.75 area, leaving it effectively flat on the day.

Soft U.S. Labor Data Dials Back October Fed Hike Expectations

The latest U.S. Nonfarm Payrolls report showed that the economy added only 29K jobs in September, markedly lower than the prior month’s downwardly revised figure of 133K. The Unemployment Rate inched up to 4.2%, while annual wage growth slowed to 3%. These readings, combined with earlier soft U.S. PCE data, have reduced the urgency for the Federal Reserve to raise interest rates later this month.

In contrast, markets have been increasingly factoring in the possibility that the Bank of Japan could deliver another rate increase as soon as October. Expectations for further BoJ tightening, together with perceived risks of direct Japanese Yen intervention, are acting as constraints on the upside in USD/JPY.

ABN Amro: October Pressure Off, December Fed Hike Still in Play

Analysts at ABN Amro view the latest U.S. labor figures as “consistent with our base case,” stating that “the apparent resurgence in the labour market over the previous two reports was somewhat of a mirage.” They note that “the three-month average of 51k is solid given labour supply, but it does not indicate a hot or tight market,” and emphasize that the softer employment backdrop “especially alongside the downside surprise in the PCE report earlier this week, removes the pressure on the Fed to hike in October.”

Despite that, ABN Amro still projects additional tightening later in the year, saying “we still expect persistent inflationary pressure from the energy shock to prompt one more Fed hike in December, for reasons similar to those in September: to prevent pass-through to consumer prices and wages.”

Market Pricing and Geopolitics Support the Dollar

Data from the CME Group’s FedWatch Tool shows that market participants continue to assign more than an 80% probability that the Federal Reserve will raise interest rates by year-end, amid concerns over energy-driven inflation. Against this backdrop, investors will focus on the upcoming FOMC Minutes, scheduled for release on Wednesday, for further insight into the central bank’s policy outlook.

At the same time, geopolitical risks linked to the ongoing conflict in the Middle East and the expanding Russia-Ukraine war are bolstering demand for the safe-haven U.S. Dollar during Monday’s Asian session. This renewed bid for the USD is lending support to USD/JPY and encourages caution among traders considering aggressive bearish positions.

USD/JPY Technical Picture: Bias Stays Upbeat Above Key Support

On the 4-hour chart, USD/JPY maintains a constructive near-term tone while trading above dynamic support at the 100-period Simple Moving Average, currently located at 156.72. Beneath that, a horizontal support zone at 156.40-156.35 is seen as an area where buyers may attempt to defend the broader uptrend should a corrective pullback develop.

On the upside, a clear move through the 158.00 level could encounter initial resistance near 158.40. A sustained break above this barrier would open the door for the pair to retest the 159.00 handle and potentially extend the prior uptrend that started from the September monthly swing low.