USD/JPY Post-NFP Rebound Puts June Opening Range in Focus

USD/JPY Outlook

USD/JPY halts a four-day decline following a larger-than-expected rise in US Non-Farm Payrolls (NFP), and the exchange rate may attempt to retrace the decline from the May high (140.93) as it trades within an ascending channel.

USD/JPY Post-NFP Rebound Puts June Opening Range in Focus

The pull back from channel resistance appears to have run its course as USD/JPY no longer reflects the series of lower highs and lows from earlier this week, with the recovery in the exchange rate coinciding with a rebound in US Treasury yields.

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FOREX.com Economic Calendar

The reaction to the +339K NFP print puts increased focus on the monthly opening range as the Federal Reserve enters the ‘blackout period’ ahead of its next interest rate decision on June 14, and it remains to be seen if the ongoing rise in employment will sway the central bank as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).

Source: CME

Until then, speculation surrounding US monetary policy may influence USD/JPY as the FedWatch Tool now reflects a greater than 70% probability of seeing the Federal Open Market Committee (FOMC) pause its hiking-cycle, and waning expectations for higher US interest rates may curb the recent rebound in the exchange rate even though the Bank of Japan (BoJ) remains in no rush to switch gears.

With that said, USD/JPY may face a larger correction ahead of the Fed meeting as it pulls back from channel resistance, but the post-NFP rebound puts the opening range for June in focus as the exchange rate snaps the series of lower highs and lows from earlier this week.

Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

• USD/JPY registered a fresh yearly high (140.93) last month as it trades within the confines of an ascending channel, with the advance in the exchange rate pushing the Relative Strength Index (RSI) into overbought territory for the first time in 2023.
• Nevertheless, the move above 70 in the RSI was short-lived as USD/JPY pulled back from channel resistance, with the opening range for June in focus as the exchange rate snaps the series of lower highs and lows from earlier this week.
• A move below the 138.70 (78.6% Fibonacci extension) to 140.00 (23.6% Fibonacci retracement) region raises the scope for a move towards the 200-Day SMA (137.30), with the next area of interest coming n around the 136.00 (23.6% Fibonacci extension).
• At the same time, failure to close below the 138.70 (78.6% Fibonacci extension) to 140.00 (23.6% Fibonacci retracement) region may push USD/JPY back towards channel resistance, with a break above the May high (140.93) bringing 141.50 (38.2% Fibonacci extension) back on the radar.

Additional Market Outlooks:

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--- Written by David Song, Strategist

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