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

• The US JOLTs job openings report revealed a smaller-than-expected number of vacancies at 7.67M.

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

The USD/JPY outlook indicates a surge in bullish momentum for the yen as investors flee risky assets after more downbeat US data. Meanwhile, the dollar wallowed after collapsing amid an increase in bets for a significant September Fed rate cut.

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The yen traded near a one-month high on Thursday as safe-haven demand for Japan’s safe-haven currency rose. This rally came after US employment data pointed to weakness in the labor market. The JOLTs job openings report revealed a smaller-than-expected number of vacancies at 7.67M.

Demand in the labor market is slowing down, raising fears of a looming recession. At the same time, expectations for a 50 bps rate cut are rising. Historically, significant Fed rate cuts have come before a recession. The sudden decline in the economy forces policymakers to lower borrowing costs fast.

Consequently, when rate cut expectations surge, 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 job growth and unemployment in the US. If there is more evidence of deterioration, the yen might continue rallying. However, the market turmoil could cloud the outlook for BoJ rate hikes. Meanwhile, the dollar might suffer due to a surge in rate-cut bets. At the moment, investors are pricing 110 bps of easing by the end of the year.

USD/JPY key events today

• ADP Non-Farm Employment Change
• Unemployment Claims
• ISM Services PMI

USD/JPY technical outlook: Bears to attack the 142.03 support

On the technical side, the USD/JPY price has broken 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 to the oversold region, indicating a surge in bearish momentum.

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Bears took charge near the 147.00 key resistance level. Since then, price action has favored the bearish side, with tiny bullish candles. The downtrend will likely continue to the next support at 142.03. However, the price might retest the 144.00 level or the SMA before falling.

https://www.forexcrunch.com/blog/2024/09/05/usd-jpy-outlook-yen-rallies-as-investors-flee-risk/