• Since the start of this week's trading, the USD/JPY exchange rate has been subject to selling operations that pushed it towards the support level of 154.54 at the time of writing the lowest analysis in two weeks.
• Selling operations increased amid pressure on the US dollar price in anticipation of weak US jobs numbers at the end of the week.

(Click on image to enlarge) 

According to the results of the economic calendar, the new Labor market numbers from the United States of America show a further slowdown in conditions, which increases fears that the US economy is sliding into recession. Moreover, one of the familiar rules in the market is that the US dollar price should fall, and stock markets should rise whenever US data comes in lower than expected because this increases the chances of the Federal Reserve cutting US interest rates.

However, cracks have appeared in this trade recently: stocks are in the red zone, and the dollar maintains a short-term recovery after the April job opportunities and Labor turnover report came in lower than expected. The number of job openings for job seekers fell to 8.059 million from 8.355 million, while the market expected 8.34 million. Consequently, this suggests that there is a slowdown in the Labor market underway, which meets the necessary condition for the Federal Reserve to cut US interest rates.

Meanwhile, some economists suggest that the US economy is heading towards a recession, meaning that the “soft landing” that markets were hoping for may not happen. Historical data shows that markets tend to underperform, and the dollar outperforms, heading towards a recession. Analysts cite some mounting evidence of this:

The unemployment rate has recently risen, in line with the expected 24-month lag that typically follows a rate hike cycle. Retail sales are flat. Already, the control group has seen a decline recently, and previous months have been revised downward. The Chicago PMI is “screaming” recession. The ISM new orders index is approaching recession-like levels.

Overall, the JOLTS numbers provide the latest evidence of a potential “slump” in the U.S. economy. (A hard landing indicates a significant slowdown due to the restrictive nature of the Fed’s rate hikes. A “no landing” or “mild” scenario assumes that inflation will fall back to the Fed’s 2.0% target, but economic growth will continue to decline. Generally, recent market action suggests that a hard landing scenario could be bullish for the dollar and bearish for markets. However, the Fed could choose to acknowledge these risks and provide fresh hints next week that a rate cut is imminent. If this happens, we could see a significant rise and fall in the dollar.

Now, all eyes are on the important US non-farm payrolls, wages and unemployment figures on Friday.

USD/JPY Technical Analysis and Expectations Today

Based on the daily chart attached, the recent sell-off is a breach of the overall uptrend in USD/JPY and a reversal downtrend could be formed if the pair moves towards the 153.60 and 152.00 support levels. Consecutive. Furthermore, this could happen quickly if US jobs numbers come in below expectations. However, it is important to note that continued divergence between the US Federal Reserve and the Bank of Japan could allow renewed buying of the dollar against the Japanese yen.

More By This Author: