Yen Weaker on Pro-Risk News

USDJPY is looking a little a firmer today ahead of the keenly awaited May US jobs report. JPY has lost some ground overnight on a slight improvement in risk sentiment linked to positive reporting on the Trump/ Xi phone call which took place yesterday. While little was given in the way of details, the two leaders agreed to continue trade negotiations, offering some optimism that a trade deal might still be agreed within the current 90-day window of reduced tariffs. JPY tends to weaken on any pro-risk news as a result of reduced safe-haven demand. As such, Yen traders will be monitoring incoming news flow on the issue with any further positive headlines likely to see JPY weaken more meaningfully.

US NFP in Focus

Looking ahead today, focus will be on the headline NFP release with the market looking for jobs to cool to 126k from 177k prior. If such a drop is confirmed this should cap the rally in USD here, putting focus back on near-term Fed easing expectations. Indeed, if we see any undershooting, this could fuel a sharp sell off in USD. On the other hand, if we see an upside surprise today USD has room to squeeze higher, putting further pressure on JPY as traders readjust their outlooks on the US economy.

Technical Views

USDJPY

For now, USDJPY remains capped by the bear channel highs and the 144.41 level. Momentum studies have flattened recently reflecting the loss of direction. While the current 142.26 support holds, however, the pair looks to be forming a base, favouring a breakout towards 148.41 next. To the downside, 139.79 remains the key support to watch.