• The yen strengthened slightly on Friday but was heading for an over 2.5% weekly loss.

• Consensus estimates indicate a 148,000 increase in US employment for September.

• Japan’s Prime Minister Ishiba has dashed hopes for a near-term rate hike.

The USD/JPY outlook shows a pause near recent peaks ahead of crucial US monthly employment figures. The dollar hovers near a six-week high due to support from a slightly hawkish Fed, upbeat data and Middle East tensions. On the other hand, the yen strengthened slightly on Friday but was heading for an over 2.5% weekly loss.

Market participants are preparing to receive the US nonfarm payrolls that will give clues on Fed policy. Consensus estimates indicate a 148,000 increase in employment for September. Meanwhile, the unemployment rate will likely remain at 4.2%. Recent US data has shown unexpected resilience in the economy.

If this trend continues, the NFP could beat expectations. An upbeat report would lower bets for a 50-bps rate cut. However, if employment falls sharply, the Fed would be forced to consider another massive cut in November. Notably, Powell recently noted that the Fed might cut twice this year by 25-bps each. The employment figures could change this outlook.

Meanwhile, data on Thursday showed better-than-expected business activity in the services sector, indicating a strong economy. Meanwhile, the dollar remained near its week-highs as Middle East tensions spooked traders. The war in the Middle East has widened to involve Iran and Lebanon. Iran made a bold attack on Israel, which could lead to retaliation.

In Japan, the new Prime Minister Ishiba has dashed hopes for a near-term rate hike. He said the economy was not ready for more rate hikes. Still, economists forecast at least one such move this year.

USD/JPY key events today

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

USD/JPY technical outlook: Rally halts near 147.01 resistance

On the technical side, the USD/JPY price has retreated after finding solid resistance at the 147.01 level. However, the bullish bias is still strong, with the price far above the 30-SMA and the RSI in bullish territory.

Furthermore, the price trades within a bullish channel with clear support and resistance lines. Bulls recently touched the channel resistance, where bears were waiting to take over. Still, if bulls remain strong, the price will keep climbing to break above 147.01. Otherwise, it will drop to revisit the channel support.

https://www.forexcrunch.com/blog/2024/10/04/usd-jpy-outlook-market-awaits-key-us-employment-figures/