USD/JPY Price – USD Gains Despite Labor Day Liquidity

VaselineSeptember 2, 2024

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USD/JPY Price – USD Gains Despite Labor Day Liquidity

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By Zain Vawda

USD/JPY continued its advance on thin liquidity on Monday. The greenback is up about 0.57% against the JPY and is on track for a fourth consecutive day of gains.

The US dollar was on one Steady gains in recent days as investors remain optimistic about the US economy after last week’s GDP data. This was followed by a decent PCE print which eased recession fears and provided some support to the greenback.

There is a big series of data from both the US and Japan this week that could shape the pair’s trajectory. The Japanese economy has been on an upward trajectory of late as speculation about the next rate hike from the Bank of Japan (BoJ). This is crucial because it comes at a time when global central banks they are looking to lower rates and not raise them.

US employment data is key

I think the biggest impact this week on USD/JPY will come from the US jobs report. The importance of this release has grown in stature since the BLS’s massive job downgrade. This led markets to start speculating on a potential 50 bps rate cut in September.

A soft jobs print could bring this conversation back to the fore and play a major role in determining the Fed’s September 18 decision. A strong jobs number could put an end to this debate, as it appears many Fed members are not comfortable starting. rate cut cycle with a 50 bps move.

There is some mid-level Japanese data that should show continued improvement in the Japanese economy. For more information on this, please read our weekly market forecast.

Future economic events — Source: For all market-moving economic releases and events, check out the MarketPulse Economic Calendar.

Technical analysis

Technically, USD/JPY appears to have bottomed below the 144.00 level before starting a recovery. Since then, the pair has recorded 3 consecutive winning days and is on track for a fourth.

Interestingly enough, this comes despite expectations of rate cuts from the Fed and rate hikes from the BoJ, which put the two central banks on different paths. In theory, the yen should gain ground against the greenback; however, there might be an explanation as to why the greenback is rising.

The answer may be two-fold, as market participants appear to be betting on the US economy following a stellar GDP revision. Also, the initial sell-off in the USD around the rate cut issue could mean that much of the expected 25bp cut in September has already been priced in.

Another aspect could be seasonality. Historically, the US dollar is enjoying a good September, while US stocks seem to be struggling. Will history repeat itself?

Today’s daily candle is about to close above the swing high of 146.37, which would signal a structural change in price action. This would increase the likelihood of a further rally even if we have a slight pullback first, potentially to resistance turned support at 146.37.

USD/JPY Chart, September 2, 2024