The US dollar weakened across the board on Friday after a softer-than-expected non-farm payrolls report, then partly recovered as rate expectations normalized. The yen, meanwhile, keeps fading its post-intervention gains as traders watch for signs of faster Bank of Japan tightening. Wednesday's US CPI report is the next catalyst for the dollar's rate-hike outlook.
The US dollar weakened across the board on Friday after a softer-than-expected non-farm payrolls report, with the headline print showing negative payroll growth and average hourly earnings missing forecasts by a notable margin. The data triggered a dovish repricing in interest rate expectations, sending the probability of a September rate hike down to 38%, from 54% before the release. That pricing has since normalized, however, with the probability climbing back to 48%.
Government job losses masked a firmer labour market
The whipsaw in rate expectations happened because a significant loss of government jobs made the report look softer than it actually was. The unemployment rate told a different story, falling further to 4.1%, and the labour market overall remains on a better trajectory than it has been over the past three years.
Attention now turns to the US CPI report on Wednesday, critical for the September FOMC decision and the Jackson Hole Symposium. A hot report would likely trigger a dollar rally as traders raise rate hike bets, while a soft report should reduce the risk of Fed tightening and add pressure on the greenback.
Yen still anchored to intervention and BoJ bets
On the yen side, not much has changed since the intervention. The only notable development came from US Treasury Secretary Bessent's remarks to CNBC, which pointed to a potentially faster Bank of Japan tightening pace. Bessent told CNBC that "it will require policy to follow up on the intervention", adding that the US would not have joined the intervention if it were not optimistic about Japan's policies.
Japan's currency diplomat Mimura said he had a shared understanding with the BoJ following the intervention, another possible hint at faster rate hikes. Without a change in the underlying fundamentals, however, interventions remain just clearing events that let traders rebuild positions at better levels. The trend is unlikely to shift without a dovish repricing in Fed expectations or a faster BoJ tightening pace.
Chart eyes the 160.50 resistance zone
On the daily chart, USD/JPY is slowly recovering ground after the intervention, with the first major target being the resistance zone around 160.50. If price reaches that level, sellers may step in with defined risk above resistance, targeting a drop back into the 155.00 handle, while buyers will look for a break higher to extend bullish bets toward new cycle highs.
Shorter timeframes tell a similar story: the 4-hour chart shows an upward trendline defining the bullish momentum, with buyers likely to lean on it during pullbacks. The 1-hour chart shows price breaking above the minor 158.50 resistance. Buyers are eyeing a push toward 160.50, while sellers want a fall back below the resistance to target the trendline instead.
Source: Investinglive
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