• The USD/JPY price analysis points south as the yen finds relief from political uncertainty.
• Traders are pricing a 12% chance of a massive Fed rate cut in September.
• The US will release benchmark revisions for jobs data between April 2024 and March 2024.

The USD/JPY price analysis points south as the yen finds relief from political uncertainty due to a weak dollar. The US dollar traded near a 7-week low against its peers as traders awaited benchmark revisions for US jobs data. At the same time, market participants are anticipating the US consumer inflation report.

The dollar remained fragile on Tuesday as Fed rate cut expectations increased after Friday’s poor jobs report. The shift to poor employment figures in the US was sudden and unexpected. As a result, the outlook for Fed rate cuts has changed drastically.

Friday’s report revealed an addition of only 22,000 jobs in August. This is a significant slowdown from previous months and puts more pressure on the Fed to lower rates. Currently, market participants are pricing three rate cuts before the end of the year. Additionally, they are pricing a 12% chance of a massive cut in September. Benchmark revisions for jobs data between April 2024 and March 2024 could reveal further weakness. This might increase the likelihood of a huge cut.

As a result, the yen recovered on Tuesday after dipping at the start of the week amid political uncertainty in Japan. The resignation of Prime Minister Ishiba could reshape monetary policy in the country.
 

USD/JPY key events today

Traders are not anticipating any high-impact releases from Japan or the US today.
 

USD/JPY technical price analysis: Bears test a solid channel support
 

(Click on image to enlarge)

USD/JPY 4-hour chart
 

On the technical side, the USD/JPY price has dropped to its channel support, where bulls could emerge to push the price higher. However, the bearish bias within the channel is strong, with the price well below the SMA and the RSI under 50.

For some time now, USD/JPY has traded within a shallow bullish channel. The price has been chopping through the SMA with no clear direction. At the same time, bears and bulls have shown almost equal strength. However, before the price entered this period of correction, bears had reversed the trend and were showing massive strength.

Therefore, the next impulsive move that breaks out of the shallow channel could be bearish. Nevertheless, bears would also have to break below the 146.50 support to confirm a continuation of the previous decline. Meanwhile, if the channel support holds, the price will likely retest the 149.00 resistance.

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