On Friday, the USD/JPY currency pair faced renewed selling pressure, reversing some of the modest gains seen in the previous session. The U.S. dollar had staged a recovery from its year-to-date low, but traders remained cautious ahead of a key speech from Federal Reserve Chair Jerome Powell. Market participants are eagerly anticipating insights regarding possible interest rate cuts, which could have significant implications for the U.S. dollar’s movements.
The ongoing divergence between Federal Reserve and Bank of Japan policies has contributed to the yen’s strength, particularly as risk appetite weakens globally. Expectations for an immediate start to the Fed’s monetary easing cycle have added further downward pressure on the Japanese yen against the dollar. Analysts are currently projecting a 25 basis point rate cut from the Fed, with some even considering the possibility of a larger, 50 basis point reduction. These forecasts were bolstered by disappointing employment data, which indicated that U.S. job growth was overstated by 818,000 positions over the past year.
Additionally, the recent data on jobless claims pointed to a cooling labor market, raising concerns about economic growth. While U.S. private sector activity has shown resilience, with steady expansion in business activity and a drop in selling price inflation, the manufacturing sector experienced significant contraction. This mixed economic picture has heightened worries about a potential slowdown in the U.S. economy, encouraging investors to seek safe-haven assets like the yen.
From a technical standpoint, the USD/JPY pair is likely to find support around the psychological level of 145.00, with the previous weekly low at 144.45 acting as another potential barrier. If downward pressure continues, prices may accelerate towards the 144.00 and 143.40 levels. Conversely, should the pair rally past 146.00, it might open up upward movement towards the 147.00 mark and beyond, depending on broader market dynamics.
