USD/JPY reaches eleven-month high amid Yen pressure, mixed US jobs data

• September’s NFP headline beats expectations, but softer wage growth and a higher jobless rate paint a mixed picture.
• Markets remain cautious ahead of the December Federal Reserve meeting, with limited labour data available.
• The JPY stays under pressure amid Japan’s rising fiscal concerns and the lack of intervention signals from authorities.

USD/JPY trades around 157.65 on Thursday at the time of writing, up 0.45% on the day after touching a fresh eleven-month high at 157.88. The pair remains supported by broad Japanese Yen (JPY) weakness, driven by domestic fiscal concerns and a cautious reaction to the delayed September US labour-market report.

The Nonfarm Payrolls (NFP) release for September shows a labour market that is resilient on the surface as payrolls increased by 119K, far above the expected 50K. However, several softer components offset this strength. August was revised to a 4K decline, the Unemployment Rate edged up to 4.4%, and Average Hourly Earnings slowed to 0.2% MoM, below the 0.3% consensus. Meanwhile, the Labour Force Participation Rate improved to 62.4%, signalling a modest increase in labour supply.

This mixed backdrop does little to clarify the Federal Reserve (Fed) outlook. With the October jobs report postponed due to the US government shutdown, policymakers will have limited labour information ahead of the December meeting. According to the CME FedWatch tool, markets now assign a 31.8% chance for a December rate cut, down from around 50% a week earlier. The latest October FOMC Minutes also carried a hawkish tone, with several officials noting stalled disinflation progress and questioning the need for additional rate cuts.

At the same time, the Japanese Yen remains under heavy pressure, weakened by growing concerns surrounding Japan’s fiscal trajectory. The government is preparing an additional budget estimated at ¥25 trillion to fund Prime Minister Sanae Takaichi’s stimulus package. This surge in expected issuance continues to push borrowing costs to multi-decade highs, triggering further selling in Japanese Government Bonds (JGBs) and supporting USD/JPY.

Japan’s economic contraction in the third quarter, its first in six quarters, adds another layer of uncertainty, potentially delaying any meaningful tightening from the Bank of Japan (BoJ). Meanwhile, repeated warnings from authorities about “rapid and one-sided” FX moves have had little market impact.

Traders notably interpreted the absence of FX discussion between Finance Minister Satsuki Katayama and BoJ Governor Kazuo Ueda as a sign that officials are comfortable with the current Japanese Yen weakness. ING analysts also stress that Japanese intervention typically occurs after a USD-negative catalyst, reducing the likelihood of imminent action.

Adding to the pressure, recent reports indicate Prime Minister Takaichi may introduce a ¥21 trillion stimulus package aimed at supporting households amid elevated inflation, further straining Japan’s public finances.

USD/JPY Technical Analysis: Consolidates near multi-month highs

USD/JPY 4-hour chart. Source: FXStreet.

In the 4-hour chart, USD/JPY trades at 157.57. The 100-period Simple Moving Average (SMA) rises steadily, reinforcing a bullish tone. Price holds well above the 100 SMA at 154.39, keeping buyers in control. The 14-period RSI prints 82.48, overbought, with strong momentum that could precede a brief pause or pullback.

The rising trend line from 146.62 underpins the advance, offering support near 155.21. Immediate resistance aligns at 157.88. A sustained break higher would extend the uptrend, while a rejection at resistance could trigger consolidation toward the trend-line support.

(The technical analysis of this story was written with the help of an AI tool)