• The dollar rose to new highs on Friday after the NFP report.

• There is a 95% chance that the Fed will implement a small cut in November.

• The yen remained fragile after Ishiba’s comments last week.

The USD/JPY outlook indicates a slight retreat from recent highs. However, bullish optimism remains intact after Friday’s better than expected employment figures. Meanwhile, the yen stayed weak after a recent shift in the outlook for Bank of Japan rate hikes.

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The dollar rose to new highs on Friday after the NFP report showed an unexpected jump in US job growth. Economists had expected 140,000 new jobs in September. However, the actual figure showed that 254,000 people were employed in September.

At the same time, the unemployment rate fell from 4.1% to 4.0%. Increased labor market demand relieves the Fed from an aggressive rate-cutting cycle. Consequently, the likelihood of a 50-bps rate cut in November fell. Meanwhile, there is a 95% chance that the Fed will implement a smaller cut.

Most economic reports last week showed that the US economy remains resilient. Job openings and private employment increased more than expected. Therefore, there is a higher likelihood the Fed will achieve a soft landing. The sudden drop in rate-cut bets supported the dollar. However, if the Fed continues lowering borrowing costs, the greenback will eventually weaken. This week, market participants will focus on US inflation figures, which will continue shaping the Fed’s policy outlook.

Meanwhile, the yen strengthened slightly on Monday. However, it remained fragile after Ishiba’s comments last week. Japan’s new prime minister dashed hopes for a near-term rate hike when he said the Country’s economy was not prepared for more hikes.

USD/JPY key events today

There will be no key reports from the US or Japan today, so the pair might consolidate.

USD/JPY technical outlook: Channel breakout indicates steeper trend

On the technical side, the USD/JPY price broke out of its bullish channel after a steep rally. At the same time, it broke above the 147.01 resistance level, pushing far above the 30-SMA. Meanwhile, the RSI entered the overbought region before pulling back.

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The channel breakout indicates a surge in bullish momentum. As a result, the previous bullish trend has become steeper and could continue higher. However, the price might revisit the recently broken channel resistance before targeting the 150.01 level.

https://www.forexcrunch.com/blog/2024/10/07/usd-jpy-outlook-dollar-optimism-fueled-by-robust-nfp/