BUZZ-COMMENT-USD/JPY gets jolted by US jobs outlook
Concerns about potential U.S. stagflation may have a greater impact on USD/JPY than tariffs.
The pair fell to a new session low as U.S. Treasury yields retreated following a weak JOLTS report. The decline brought USD/JPY back into an expanding daily cloud between 153.37 and 154.82, neutralizing a potential bullish technical outlook.
Before the U.S. data release, slow stochastics were on the verge of turning upward, helping USD/JPY challenge the top of a developing bullish wedge between a descending trendline from the Jan. 10 high and the 153.72-79 late-January double-bottom. While the wedge remains intact, upward momentum has been sapped.
A rebound in U.S. Treasury yields due to inflation concerns would lend support to USD/JPY, potentially reviving a bullish vibe. The relationship between the pair and the steepness of the Treasury yield curve has been strengthening lately. This connection is growing as U.S. 5-year breakevens reach a new two-year high, widening the gap with the more stable 10-year counterpart.
How the U.S. economy is faring, particularly the jobs market and wages, will be in full the focus on Friday. A weak non-farm payrolls number could send USD/JPY below its wedge base and toward its cloud bottom at 153.37 and put yen bulls in control.
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