USD/JPY Price Analysis: US Labour Market Remains Tight

• The US economy recovered more quickly than anticipated in the third quarter.
• The number of Americans submitting new claims for unemployment benefits increased.
• The Fed forecasted at least 75bps by the end of 2023.

Today’s USD/JPY price analysis is slightly bullish. The US dollar increased in value against most of its major competitors after data from the country indicated that the labor market was strong, which could help the Federal Reserve maintain its hawkish stance.

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While the economy recovered more quickly than anticipated in the third quarter, the number of Americans submitting new claims for unemployment benefits increased less than anticipated last week, indicating a still-tight labor market.

The US central bank continues its aggressive policy-tightening campaign because of the labor market’s resilience. Last week, the Fed forecasted at least 75 basis points of increases in borrowing rates by the end of 2023. It increased its policy rate this year by 425 basis points from close to zero, which is the highest since late 2007.

The dollar’s exchange rate to the yen was roughly steady at 132.49 yen, not too far from the four-month bottom of 130.58 yen reached on Tuesday after an unexpected change to the Bank of Japan’s bond-yield regulations sparked wagers to strengthen the yen.

The 3.8% decline the dollar saw after the news on Tuesday has yet to be significantly recovered.

According to Michael Brown, an analyst at Trader X, the yen has a lot of room to rise from this point. The BOJ grows more hawkish, and markets continue to be skeptical of the Fed’s statements. Brown continued, “I think dollar-yen has the potential to fall back towards the mid-120s, perhaps 125 or 126.”

USD/JPY key events today

Investors will keep an eye on US reports, particularly new home sales, core durable goods, and the PCE price index.

USD/JPY technical price analysis: Bears might return as the 30-SMA approaches

The chart above shows a weak rebound that paused at the 132.50 resistance level. The price has been trading below the 30-SMA, indicating that the trend is bearish. The RSI also supports this as it trades below 50.

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As the price gets closer to the SMA, bulls get weaker. The SMA might act as a strong resistance, allowing bears to return. That would mean a retest of the 130.55 support level.

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