Waiting for the release of US non-farm employment data | 04 October 2024

An event to look out for today:

15:30 GMT+3. USD - Unemployment Rate

USDJPY:

The USD/JPY pair is fluctuating in a narrow range in the Asian session on Friday, consolidating its weekly rise to its highest level since 19 August, reached the previous day. Spot prices are currently trading below 147.00, unchanged for the day, as traders prefer to stay on the sidelines ahead of the release of important monthly US employment data.

The US Non-Farm Payrolls (NFP) report is expected to show that the country added 140,000 jobs in September, down slightly from 142,000 in the previous month, while the unemployment rate remained unchanged at 4.2%. In addition, average hourly earnings will be looked at to determine the size of the rate cut by the Federal Reserve (Fed) at its next meeting in November. This, in turn, will play a key role in fuelling demand for the US Dollar (USD) and provide a meaningful boost to the USD/JPY pair.

Ahead of the key data release, investors lowered bets on more aggressive Fed policy easing amid signs of a still resilient US labour market. This sent the US Dollar Index (DXY), which tracks the dollar against a basket of currencies, to a one-month high on Thursday. In addition, lower bets for a Bank of Japan rate hike in 2024 as well as political uncertainty ahead of Japan's snap election on 27 October could undermine the Japanese Yen (JPY) and serve as a tailwind for the USD/JPY pair.

Nevertheless, spot prices continue to rise for the second week in the last three, and if the US employment data does not offer any negative surprises, the fundamental backdrop supports the prospects for further gains. At the same time, persistent geopolitical risks associated with ongoing conflicts in the Middle East and the risk of a full-scale war in the region may favour the yen. This may prove to be the only factor restraining bullish traders from aggressive bets on USD/JPY.

Trading recommendation: Trade predominantly with Buy orders from the current price level

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