USD/JPY jumps toward 106.00 after NFP, retreats to 105.70

• USD/JPY spiked to a fresh daily high with the initial reaction to US data.
• Nonfarm Payrolls in the US increased by 1,763,000 in July.
• US Dollar Index stays in the positive territory above 93.00.

The USD/JPY pair rose to a fresh daily high of 105.86 with the initial reaction to the US labour market data but quickly erased a portion of its gains. As of writing, the pair was trading at 105.72, still up 0.17% on a daily basis.

Focus shifts to US politics

The most anticipated macroeconomic data of the week showed on Friday that Nonfarm Payrolls (NFP) in the US increased by 1,763,000 in July. This reading came in slightly better than the market expectation of 1.6 million. Although the S&P 500 futures gained traction right after the data to show a positive impact on the market sentiment, investors remain cautious with US lawmakers struggling to reach a deal on the next coronavirus aid bill.

Commenting on the data, “America gained 1,763 million jobs in July, 1.462 million in private payrolls, both better than expected – but a significant deceleration from June’s 4.791 million jobs,” said FXStreet analyst Yohay Elam. “The relatively robust increase in government positions is due to a summer seasonal adjustment – which is different this year as teachers were already laid off earlier and not in July.” 

After testing 93.00, the US Dollar Index (DXY) turned north and helped USD/JPY stay in the positive territory. At the moment, the DXY is at its highest level in two days at 93.43, gaining 0.72% on the day.

In the second half of the day, market participants will focus on political developments in the US and Wall Street’s reaction.

Technical levels to watch for