USD/JPY Pushes Below January Range Ahead of US NFP Report

US Dollar Outlook: USD/JPY

USD/JPY extends the decline from the start of the week to push below the January low (153.72), and the weakness in the exchange rate may persist over the remainder of the week as it starts to carve a series of lower highs and lows.

USD/JPY Pushes Below January Range Ahead of US NFP Report

USD/JPY trades to a fresh yearly low (152.12) as the ISM Services survey prints at 52.8 in January versus forecasts for a 54.3 reading, and the exchange rate may struggle to retain the advance from the December low (148.65) as it fails to hold within the January range.

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US Economic Calendar

In turn, a further decline in USD/JPY may push the Relative Strength Index (RSI) towards oversold territory, but data prints coming out of the US may continue to sway the exchange rate as the Non-Farm Payrolls (NFP) report is anticipated to show the economy adding 170K jobs in January.

In addition, the Unemployment Rate is anticipated to hold steady at 4.1% during the same period, and a positive development may lead to a bullish reaction in the US Dollar as it encourages the Federal Reserve to keep US interest rates on hold at its next meeting in March.

With that said, the recent selloff in USD/JPY may turn out to be temporary as the Federal Reserve pauses its rate-cutting cycle, but a weaker-than-expected NFP report may drag on the Greenback as it fuels speculation for lower US interest rates.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView

• USD/JPY starts to carve a series of lower highs and lows as it no longer trades within the January range, with a breach below 151.95 (2022 high) raising the scope for a move towards the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone.
• Failure to defend the December low (148.65) opens up the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) region, but lack of momentum to push below 151.95 (2022 high) may curb the bearish price series.
• Need a close back above 153.80 (23.6% Fibonacci retracement) to bring the monthly high (155.89) on the radar, with a break/close above 156.50 (78.6% Fibonacci extension) opening up the January high (158.88).

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--- Written by David Song, Senior Strategist

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