• Investors eyed the upcoming US nonfarm payrolls report.
• Economists predict a 165,000 US jobs addition in August.
• Data from Japan revealed that the manufacturing PMI contracted at a slower rate last month.

The USD/JPY outlook is slightly bearish as the dollar retreats ahead of pivotal US employment data. Meanwhile, the yen steadied as the outlook for BoJ rate hikes improved after Japan’s manufacturing PMI report.

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The dollar fell against the yen on Tuesday as investors eyed the upcoming US nonfarm payrolls report. Nevertheless, it remained near highs hit after the US PCE figures on Friday. Inflation increased as expected in July, increasing the likelihood of a gradual Fed rate-cutting cycle. As a result, the dollar rallied. Nevertheless, this outlook might keep shifting as investors receive more data. Notably, the next major report will show the state of the labor market.

Economists predict a 165,000 jobs addition in August, bigger than the previous month. Meanwhile, the unemployment rate could ease from 4.3% to 4.2%. If the figures align with expectations, it will solidify bets for a smaller rate cut, likely boosting the dollar. On the other hand, if unemployment continues increasing, the Fed might be forced to implement a significant rate cut.

Meanwhile, on Friday, data from Japan revealed that the manufacturing PMI contracted at a slower rate last month. The PMI increased from 49.1 in July to 49.8, remaining below 50. Moreover, it came in bigger than the estimates of 49.5, a sign that business activity in the manufacturing sector was rebounding faster than expected.

Furthermore, the report showed that input prices grew due to a weak yen, which boosted inflation. This was a relief for the BoJ, which needs higher inflation to continue hiking interest rates.

USD/JPY key events today

• US ISM Manufacturing PMI

USD/JPY technical outlook: Price retesting SMA support

On the technical side, the USD/JPY price is pulling back to retest the 30-SMA support after a strong bullish run. Despite the retreat, the bullish bias remains intact, with the price above the SMA and the RSI slightly over 50. Therefore, the retreat might pause and bounce higher after retesting the SMA to continue the uptrend.

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If bulls return at the 30-SMA, the price will likely reach the 149.01 resistance level. This would be a higher high, solidifying the bullish bias.

https://www.forexcrunch.com/blog/2024/09/03/usd-jpy-outlook-markets-brace-for-us-ism-data/