The USD/JPY currency pair finds itself in a precarious position, having recently broken down below the significant 152.50-152.45 confluence, which includes the key 100- and 200-day Simple Moving Averages (SMAs). Despite staging a notable intraday recovery from sub-151.00 levels—the lowest since December 10—the pair remains under pressure and is poised to register losses for a fourth consecutive week. A narrowing US-Japan interest rate differential is playing a crucial role in limiting Japanese Yen (JPY) losses while simultaneously capping any substantial recovery for the major.
Investor sentiment remains cautious amid the backdrop of Japan's 10-year government bond yield reaching a 14-year peak. The USD/JPY pair has managed to reclaim the crucial 153.00 round figure, yet it remains vulnerable, with the 151.00 mark emerging as immediate support. Market oscillators continue to reflect deep negativity on the daily chart, staying well clear of entering the oversold zone. This suggests that the pair may struggle to sustain any meaningful upward momentum.
The upcoming US Nonfarm Payrolls (NFP) report is central to market participants' focus, with expectations that the world's largest economy added 170,000 jobs in January. The unemployment rate is anticipated to remain steady at 4.1%. These economic indicators will significantly influence expectations regarding the Federal Reserve's future interest rate decisions. Investors remain wary and reluctant to engage in aggressive trading ahead of this critical data release.
The US-Japan yield differential has narrowed, providing some support for the JPY and helping to limit its losses against the US Dollar. However, this same factor serves as a cap on any significant recovery for the USD/JPY pair, which is likely to face resistance near the 152.00 mark. Should the pair break below this level, it remains vulnerable to further weakening towards the 150.55-150.50 support range.