USD/JPY: Rangleplay continues with T-yield curve flattening ahead of Nonfarm Payrolls

• USD/JPY is consolidating in a narrow range for fourth straight day. 
• The bond yield curve has flattened by three basis points. 
• The US Nonfarm Payrolls data is expected to show 850K job additions.

USD/JPY continues to trade in a narrow range of 105.35-105.80 for the fourth straight day as investors await the release of a closely watched US jobs data. 

While the pair is lacking a clear directional bias, the Treasury yield curve is flattening. The spread between the US 10- and two-year yields is currently seen at 55 basis points – down from Thursday’s monthly high of 58.2 basis points. 

The longer duration yield has come under pressure, possibly due to reports stating that progress in Washington’s negotiations over a stimulus package has again stalled. 

The longer duration yield will likely rise, causing a steepening of the yield curve and lifting USD/JPY above 105.80 if the Nonfarm Payrolls data shows jobs growth accelerated in September. 

According to a Reuters survey of economists, the data is expected to show the US economy added 850,000 jobs in September after adding 1.371 million in August. That would leave nonfarm payrolls about 10.7 million below their pre-pandemic level.

Technical levels