USD/JPY Price Analysis: US Labor Market Remains Resilient

• Layoffs in the US decreased by 43% in December.

• Initial unemployment benefits in the US plummeted to a three-month low last week.

• Tokyo’s core consumer price index (CPI) was predicted to have increased by 3.8% in December. 

Today’s USD/JPY price analysis is bullish. On Friday, the dollar stayed near a one-month high after US economic data showed a stubbornly tight labor market that might keep the Federal Reserve on its aggressive rate-hike path.

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Layoffs decreased by 43% in December, while the number of Americans submitting new unemployment benefit claims plummeted to a three-month low last week, indicating a relatively tight labor market.

Other data released Thursday showed that private firms hired many more people than anticipated in the past month, underscoring the labor market’s resilience. The reports suggested the economy finished 2022 on stable ground, despite numerous layoffs in the technology sector and interest rate-sensitive industries like banking and housing.

The sustained strength of the jobs market increases the risk that the Fed may raise its target interest rate above the 5.1% peak it predicted last month and maintain it there for some time.

A Reuters survey of economists on Friday revealed that consumer prices in the capital of Japan likely increased at the quickest rate in nearly 41 years in December. The market is watching inflation data for signs of a potential change in monetary policy.

According to the median prediction of 16 economists, Tokyo’s core consumer price index (CPI), a key indicator of trends in national inflation, was predicted to have increased by 3.8% from a year earlier in December due to broadening retail price increases.

USD/JPY key events today

Investors are awaiting a jobs report from the United States that will include the nonfarm payrolls and the unemployment rate.

USD/JPY technical price analysis: Strong resistance ahead

USD/JPY is trending up in the 4-hour chart. The price is trading far above the 30-SMA and the RSI, which shows strong bullish momentum, is above 50. Bulls took over when they made a strong bullish candle that broke above the 30-SMA. Since then, the price has pushed higher with short pullbacks. 

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However, Bears might soon return as the price is nearing the 134.50 resistance level. Bears will take over if the resistance stops the bullish move. The trend will only reverse to a downside when the price breaks below the 30-SMA.

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