USD/JPY Outlook: Yen rises as investors flee risk

• The yen traded near a one-month high on Thursday on haven demand.

• The US JOLT job openings report revealed a lower-than-expected number of job vacancies at 7.67 million.

• Investors will be keen to see the state of US job growth and unemployment.

The USD/JPY outlook points to an uptick in bullish momentum for the yen as investors flee riskier assets after more dovish US data. Meanwhile, the dollar took a beating after falling amid an increase in bets for a significant Fed rate cut in September.

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The yen traded near a one-month high on Thursday as safe-haven demand for the Japanese currency increased. This increase came after US employment data indicated a weak labor market. The JOLT job openings report revealed a lower-than-expected number of vacancies at 7.67 million.

Labor market demand is slowing, fueling fears of a looming recession. At the same time, expectations for a 50 bps rate cut are rising. Historically, significant Fed rate cuts have occurred before a recession. The sharp decline in the economy is forcing policymakers to quickly reduce borrowing costs.

Consequently, when expectations of a rate cut rise, investors panic. Moreover, they dump risky assets and buy safer ones like the yen. This causes a lot of market turmoil.

On Friday, investors will be keen to see the state of US job growth and unemployment. If there is more evidence of deterioration, the yen could continue to rise. However, market turmoil could cloud the outlook for BoJ rate hikes. Meanwhile, the dollar could suffer from an increase in rate cut bets. Right now, investors are pricing in 110 bps of easing through the end of the year.

Key USD/JPY Events Today

• Non-farm ADP labor force change
• Unemployment claims
• PMI ISM Services

USD/JPY Technical Outlook: Bears will attack 142.03 support

Technically, the USD/JPY price fell below the 144.00 support level to make a new low. The bias is bearish as the price has fallen well below the 30-SMA. At the same time, the RSI dipped into the oversold region, indicating an increase in bearish momentum.

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Bears took control near the key resistance level of 147.00. Since then, price action has been bearish, with small bullish candles. The downtrend is likely to continue to the next support at 142.03. However, the price could retest the 144.00 level or SMA before declining.

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