• The dollar strengthened on hawkish Fed remarks.

• The yen firmed after hints that the BoJ might hike interest rates.

• US data on Thursday revealed a surge in unemployment claims.

The USD/JPY outlook is mildly bullish as the dollar gains momentum on hawkish Fed remarks. Yet, the yen is also holding its ground, fueled by hints of potential interest rate hikes from the Bank of Japan. At the same time, there is caution in the markets ahead of the NFP report.

The dollar rallied despite a poor employment report on Thursday as Fed officials pushed back rate cut expectations. Initially, the dollar fell after the US released data showing a surge in unemployment claims. The jobless claims rose to a two-month high, indicating a rise in unemployment. Consequently, rate-cut bets increased.

However, this soon changed when Fed officials assumed a hawkish tone. Some officials, including Neel Kashkari and Thomas Barkin, said the Fed still had enough time to ensure inflation would reach its target. Therefore, there was no hurry to cut rates. Kashkari even said there might be no need for rate cuts this year. These remarks damped rate-cut expectations and pushed the dollar higher.

Investors will now watch the nonfarm payrolls for more clues on rate cuts. Economists expect a decline in employment in March.

However, gains were small in the USD/JPY pair as the yen also strengthened. Notably, BoJ governor Kazuo Ueda said inflation will likely accelerate after the recent pay hikes. Market participants took this as a hint that the central bank might be planning another rate hike. Consequently, Japanese yields soared, boosting the yen. At the same time, Finance Minister Shunichi Suzuki warned that authorities would do all it takes to stop more sharp declines in the yen.

USD/JPY key events today

• US average hourly earnings m/m
• US nonfarm employment change
• US unemployment rate

USD/JPY technical outlook: Bears find footing below the 30-SMA

On the technical side, the USD/JPY price has broken below the 30-SMA with strong bearish candles. At the same time, the RSI now trades below 50, supporting bearish momentum. The price has traded in a tight consolidation since it made an engulfing candle. However, it has now made a strong move lower that could lead to further declines.

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Before the price continues lower, it might pull back to retest the 30-SMA as resistance. Bears will likely target the 150.00 key support level if the SMA holds firm.

https://www.forexcrunch.com/blog/2024/04/05/usd-jpy-outlook-yen-rises-amid-bojs-intervention-signals/