USD/JPY drops to a one-month low as market sentiment worsens ahead of this week’s key economic event – the US Non-Farm Payrolls (NFP) report

USD/JPY continues to trend lower, hitting a fresh one-month low on Thursday, driven by expectations of a Federal Reserve rate cut and the diverging policies between the Fed and the Bank of Japan (BoJ). While the Fed is moving toward its first rate cut, the BoJ has begun its tightening cycle, with hawkish signals from top officials.

Weak US labor data added to the pressure, as the ADP report showed private sector hiring fell well short of expectations in August, and although the JOLTS job openings report slightly exceeded consensus, the overall outlook remains soft.

The yen also gained strength due to safe-haven demand amid uncertainty surrounding the US economic situation and ongoing geopolitical tensions.

The recent leg lower generated negative signals, with Wednesday’s return and close below the falling 10-day moving average (144.77) and the break of key support levels at 143.50/44 (the 76.4% Fibonacci retracement of the 141.68/149.40 move and the former higher low from Aug 26).

A close below these levels would confirm the bearish signal, opening the path toward further downside targets at 141.68 (the Aug 5 spike low) and 140.48/25 (the 61.8% Fibonacci retracement of the 127.22/161.95 move and the Dec 28 trough).

Markets are now focusing on the most significant US labor report – the Nonfarm Payrolls (forecast at 164K for August vs. 114K in July). Another miss on Friday, though the ADP report is not always a reliable indicator for NFP, would reinforce signals of a slowing US labor market, adding to speculation about more aggressive action by the Fed and increasing pressure on the dollar.

Res: 143.90; 144.63; 144.77; 145.54
Sup: 142.84; 141.68; 140.48; 140.25