The USD/JPY currency pair is trading with a slight upside bias on Tuesday, as the US Dollar (USD) attempts to stabilize ahead of the critical JOLTS (Job Openings and Labour Turnover Survey) data due at 14:00 GMT.
The Japanese Yen (JPY), meanwhile, remains pressured by ongoing monetary policy divergence between the Federal Reserve (Fed) and the Bank of Japan (BoJ), a core theme that continues to shape the trajectory of this major FX pair.
At the time of writing, USD/JPY is hovering above 143.00, recovering nearly 0.50% of Monday’s losses, supported by technical buying and expectations surrounding incoming US economic data. A complete overview of the subject is provided in this article, guided by NordaLueur brokers.
Focus Shifts to JOLTS as Labour Market Comes Into View
Today’s spotlight is on the JOLTS job openings report, which serves as a leading indicator of labour market strength. Consensus forecasts point to a slight decline in job openings to 7.1 million for April, down from 7.2 million in March, reflecting a cooling labour market amid restrictive Fed policy.
This release marks the first in a series of high-impact US employment data this week, culminating in Friday’s Nonfarm Payrolls (NFP) and the Unemployment Rate. While JOLTS is typically seen as a second-tier indicator, its timing is critical, offering a preview of the broader health of the labour market, which remains a core determinant of Fed rate path expectations.
Should job openings fall more than expected, it could signal waning demand for labour, reinforcing the narrative that the US economy is slowing and nudging the Fed toward a September rate cut. This scenario would likely weaken the US Dollar, offering support for the Japanese Yen.
Monetary Policy Divergence: Fed vs. BoJ
The divergence in monetary policy outlooks between the Fed and BoJ continues to dominate USD/JPY flows. The Federal Reserve has maintained a hawkish stance, prioritising its 2% inflation target while also balancing its dual mandate of price stability and full employment, defined as an Unemployment Rate near 4%.
In contrast, Japan’s central bank is gradually shifting from its long-standing ultra-loose monetary policy. On Tuesday, BoJ Governor Kazuo Ueda reiterated the central bank’s willingness to raise interest rates if underlying inflation moves toward 2% sustainably. Ueda stated, as quoted by Reuters, that the BoJ is “expected to continue hiking rates if underlying inflation accelerates.”
This hawkish signal adds a bullish undertone to the JPY, even though Japanese interest rates remain low at 0.5%, far below their US counterparts.
Technical Outlook: USD/JPY Holds Firm Above 143.00
From a technical analysis perspective, the USD/JPY daily chart shows that the pair has rebounded from Monday’s lows, regaining key levels and confirming buyer interest near critical support zones.
The pair retested the 61.8% Fibonacci retracement level from the April-May rally, located at 143.24. This level sits just above the psychological threshold of 143.00, suggesting it could act as a pivot zone in the near term.
The pair then slipped below the 10-day Simple Moving Average (SMA) at 143.66, triggering bearish pressure. However, support at 142.38 (daily low) and 142.11 (May 27 low) held firm, keeping the 142.00 level intact.
If downside momentum returns, a break below 142.00 would expose deeper retracement zones, signalling a potential trend shift.
On the upside, if the USD/JPY continues its climb, surpassing the 10-day SMA and the 61.8% retracement, the next resistance lies at 144.27, the 50% retracement of the same rally.
Market Sentiment and Risk Events Ahead
The broader market sentiment remains cautious, with investors closely monitoring employment data for signs of economic slowdown and potential Fed policy pivots. With expectations building for a rate cut in September, any substantial weakness in today’s JOLTS data or Friday’s Nonfarm Payrolls could trigger further Dollar selling.
Meanwhile, in Japan, inflationary pressures remain moderate but persistent, giving the BoJ more flexibility to adjust interest rates gradually. A stronger JPY could materialize if inflation climbs further and the BoJ proceeds with incremental tightening.
Conclusion
The USD/JPY pair is at a technical and fundamental crossroads, with traders awaiting fresh labour market cues from the JOLTS report. As the Fed and BoJ navigate diverging economic landscapes, their respective policies will remain key drivers of the currency pair’s trajectory.
If US job data confirms a softening trend, markets may begin pricing in more aggressive Fed rate cuts, pressuring the US Dollar and offering upside for the Japanese Yen. On the other hand, resilient labour data may reignite Dollar strength, especially if combined with risk-off sentiment.
The upcoming May NFP data on Friday will serve as a crucial confirmation point for trends set in motion by today’s JOLTS figures. Until then, 143.00 remains the technical battleground, with traders watching closely for a decisive move in either direction.
