USDJPY continued to trade near five-month loss on Friday after recording a third successive daily loss during the Asian session. The currency pair hit lows of 147.38 and was down by 0.3% at the time of writing, bringing its monthly losses to 4.3%. The dollar is experiencing an extended decline across the broader market, with the DXY index at four-month lows.
The highlight of the week is February’s Non Farm Payrolls and unemployment rate data, scheduled for release on Friday. A weak labour market could add credence to concerns that the US economy is staring at a slowdown, adding downward pressure on USDJPY.
Investors are concerned that the harsh global market conditions created by a high trade tariff environment could be counter-productive for the US economy. Yields on benchmark 10-year US treasury bonds have been subdued below 4.30% for the last two weeks, signalling declining confidence in the trajectory of the US economy.
Meanwhile, the Bank of Japan (BoJ) is expected to maintain a hawkish stance, with a likely interest rate raise in March. On the other hand, the Federal Reserve could be forced to swing into action and slash interest rates in the second quarter of the year if the US economy continues to show signs of weakness. This scenario sets the USDJPY pair up for an extended decline in the medium-term.
USDJPY Prediction
The momentum on USDJPY calls for further downside below the pivot mark at 147.90. The currency pair will likely find the first support at 147.43, but an extended control by the sellers could result in further decline to test 146.95.
Alternatively, the action will swing to the upside if action goes above 147.90. That could see the first resistance encountered at 148.40. A stronger upward momentum will breach that barrier and invalidate the downside narrative. Furthermore, an extended control by the buyers could lead to more gains and take action to the second resistance level at 148.80.
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