• The USD/PY pair reached new lows on Friday after a mixed US employment report.

• The US nonfarm payrolls report showed slower job growth in August.

• Japan’s GDP grew by 2.9% compared to estimates of 3.2%.

The USD/JPY forecast shows a slight recovery in the pair from Friday’s plunge as the yen loses some of its shine. At the same time, the dollar gained as it became clear that the Fed might cut rates gradually.

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After a mixed US employment report, the USD/PY pair reached new lows on Friday. The nonfarm payrolls report showed slower job growth, with the economy adding 142,000 jobs compared to estimates of 160,000. Meanwhile, the unemployment rate eased to 4.2%.

The initial reaction was a decline in the US dollar. However, it recovered as it became clear that the labor market was slowing down steadily. Therefore, the risk of a recession remains low. Although most major peers lost against the dollar on Friday, the yen remained steady due to rate hike optimism.

Notably, on Thursday, BoJ board member Hajime Takata said the central bank should continue hiking interest rates. Nevertheless, he emphasized a cautious approach amid increased market volatility. Policymakers are ready to push interest rates higher as long as economic consumption increases.

However, by Monday morning, economic data from Japan dampened some of this rate hike optimism. Japan’s economy grew slower than forecast in the second quarter. The GDP grew by 2.9% compared to estimates of 3.2%. Weaker-than-expected economic performance creates a challenge for the BoJ’s rate hike outlook.

USD/JPY key events today

Market participants do not expect any high-impact economic releases in Japan or the US.

USD/JPY technical forecast: Bears found rock bottom at 142.03 support

On the technical side, the USD/JPY price is recovering after finding support at the 142.03 level. Nevertheless, the price trades below the 30-SMA, with the RSI in bearish territory. Therefore, the bias is bearish, meaning the rebound might only be temporary.

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Bulls are approaching a solid resistance zone comprising the 0.382 Fib and 144.00 key levels. Moreover, the SMA trades just above this zone. Consequently, the price will likely pause at this level and bounce lower. A break below 142.03 will confirm a continuation of the downtrend.

https://www.forexcrunch.com/blog/2024/09/09/usd-jpy-forecast-strong-pullback-as-yen-loses-luster/