USDJPY On Course to Break Out After US Jobs Data Release

Summary:
• After a week-long sideways action underpinned by lack of impactful macroeconomic data, USDJPY has received fresh impetus from jobs data.

USDJPY has recovered some of the losses incurred early on Thursday, but was marginally down ahead of the US Initial Jobless Claims data release, as the pair stuck in the 150.00 region. The dollar rose +0.11 in the minutes following the release, and is on course to register two consecutive days of gains for the first time since February 13^th.  The US dollar had faced headwinds triggered by falling Treasury yields and less-than-impressive FOMC minutes.

The Federal Open Market Committee (FOMC) meeting in January recorded less-than-reassuring minutes, showing a degree of uncertainty over interest rate policy. Members were generally in agreement that the Fed needed to ensure that inflation comes down to sustainable levels relative to the 2% target. However, some members seemed to give more weight to the impact of high interest rates on the economy, while relatively easy on the impact of inflation. Furthermore, some comments signal that Fed rates may have peaked.  This has been interpreted as dovish among some analysts.

The Department of Labor data released on Thursday showed that the number of Initial Jobless Claims fell to 201,000, beating the projected 217,000. Meanwhile, the figure for the week ending February 10 has been revised upwards to 213k from 212k. Nonetheless, that is still better than the projected 219k.

This is the third week in a row that the US labor market has outperformed projections, and this will certainly prop up the dollar. The FOMC minutes stated that the Fed was not in a hurry to cut interest rates, but would wait until the economy was stable enough to run on lower rates without heating up. Attention now shifts to the Bank of Japan to see its next course of action if the USDJPY pair hits 151.00 on the current momentum.

Technical analysis

USDJPY is on a bullish momentum, as shown by the RSI indicator on the 30-minute chart. The momentum will need to stay above the 150.40 mark to keep the bulls in control. That could see the bulls break the resistance at 150.55, beyond which they will attempt breaking 150.66. A fall in momentum below the 150.40 mark could see the sellers breach the 150.29 support. Extended bearish support beyond that level could see them pull the price to 150.09.