USD/JPY Outlook: Fewer Jobless Claims Boost Dollar

• US unemployment claims figures revealed a drop to 233,000.

• Despite signs of weakness, the US labor market remains resilient.

• BoJ minutes on Thursday showed a more hawkish tone among policymakers.

The USD/JPY outlook leans bullish as the dollar recovers following upbeat US employment figures. Meanwhile, the yen extended declines as recent recession worries eased and risk appetite improved.

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On Thursday, the US released unemployment claims figures showing a drop to 233,000, the most significant decline in nearly a year. Economists had expected 240,000 claims. The figures eased fears that the labor market was deteriorating rapidly. Last week, data showed a massive jump in the unemployment rate, sparking fears of a slowdown. This panic boosted the yen, considered a haven in times of uncertainty. 

However, calm later returned as data showed other sectors of the US economy remained resilient. The dollar traded near a four-month low as Fed rate cut expectations surged. However, this decline paused as the market turmoil eased. Despite signs of weakness, the labor market remains resilient. Nevertheless, last week’s report was a catalyst for the Fed to start lowering borrowing costs to avoid a new downtrend in the sector. 

Meanwhile, the yen has remained vulnerable since the Bank of Japan Deputy Governor dashed hopes for a near-term rate hike. He called for a pause because of recent volatility in the global markets. Meanwhile, BoJ minutes on Thursday showed a more hawkish tone, increasing the uncertainty on the central bank’s policy outlook. 

USD/JPY key events today

It might be a slow end to the week as investors do not expect key reports from Japan or the US. 

USD/JPY technical outlook: Bulls steady above the 30-SMA

On the technical side, the USD/JPY price trades above the 30-SMA, and the RSI is above 50, indicating a bullish bias. This shift comes after the price reversed at the 142.56 level. Here, the price got deeply oversold, allowing bulls to resurface.

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The new direction above the SMA will allow the price to revisit the 150.03 resistance level. If it breaks above, it will reach the 155.01 resistance. However, there is also a chance that this is only a deep pullback before the price reverses to the downside. Still, bears will only return if the price breaks below the 30-SMA. Otherwise, USD/JPY will start making higher highs and lows.

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