USD/JPY Price Forecast – Pair Defends 149.00 as US Jobs Data and Japan Turmoil Loom

USD/JPY Holds Near 149.00 as Traders Brace for US Jobs Data and Japan’s Political Strain

The USD/JPY pair is locked in heavy volatility around the 148.70–149.00 zone, a region that has repeatedly capped rallies this summer. Wednesday’s session saw the exchange rate climb to 149.14 before paring gains, leaving traders preparing for decisive moves around the upcoming U.S. Nonfarm Payrolls report and shifting Japanese political dynamics. The dollar has held firm despite softer Treasury moves, supported by speculation that the Federal Reserve may keep rates elevated longer, while the yen remains under pressure from surging JGB yields and government uncertainty.

Fed Policy Expectations Anchor Dollar Moves Against JPY

Markets continue to price in a 91% chance of a Fed rate cut in September, yet the pace of easing remains contested. CME FedWatch futures still point to 55 basis points of cuts by year-end, but a stronger labor market print could force repricing closer to 25–50 bps. July’s JOLTS report already showed job openings falling to 7.18 million from 7.44 million, underscoring slowing demand for labor, but Friday’s NFP is forecast to show only 75,000 new jobs with unemployment climbing to 4.3%. A weaker reading would validate dovish expectations and weigh on USD/JPY, while resilience in job creation could push the dollar higher and revive the case for policy patience.

Japan’s Political Tensions Deepen Yen’s Vulnerability

On the yen side, domestic factors are adding weight. Reports of the Secretary General of the ruling party preparing to resign have stoked uncertainty around Prime Minister Shigeru Ishiba’s leadership, raising fears of a destabilized policy front. Long-term JGB yields surged to 3.29%, the highest in decades, reflecting market concerns about fiscal sustainability. Yet despite higher yields, the yen continues to weaken, suggesting global investors still prefer carry trades against the Japanese currency as the BoJ maintains ultra-loose policy. Without a clear commitment from the BoJ to tighten further, political instability compounds yen weakness, leaving USD/JPY tilted toward the upside in the near term.

Technical Levels Define USD/JPY Range Before Breakout

Technically, USD/JPY has been locked in a tight one-month range, with resistance at 148.70–148.95 and support anchored near 146.20–146.60. A sustained close above 148.95 would target 150.30 and 150.92, with a break there exposing the March high at 151.31 and longer extensions toward 151.60. On the downside, failure to defend 147.10 risks a slide back to 146.22, the August low. Momentum indicators show mixed signals: the RSI is hovering in overbought territory near 70, reinforcing the need for a corrective pullback, while both the 50-day SMA at 147.15 and 200-day SMA at 147.70 slope positively, maintaining a bullish medium-term structure. Traders are watching for whether NFP or political shocks provide the catalyst for a clean breakout.

Investor Sentiment and Carry Trades Sustain Dollar Advantage

Carry trade dynamics remain in favor of the dollar, with U.S. yields still comfortably above Japan’s near-zero policy rates. The widening yield gap, combined with expectations that the Fed will be slower to cut than previously thought, continues to underpin USD/JPY demand at dips. Speculative positioning shows hedge funds maintaining net long exposure to the pair, while retail traders remain net short, a contrarian indicator that often supports further upside. However, intraday volatility is expected to spike around job reports and wage data, requiring disciplined risk management.

Key Catalysts Ahead for USD/JPY

The remainder of the week holds multiple triggers: U.S. ADP private payrolls, ISM Services PMI, and Jobless Claims precede Friday’s Nonfarm Payrolls. Japan will release wage growth data, which, if stronger than expected, could temper yen weakness by reviving hopes of gradual BoJ tightening. Until then, USD/JPY is likely to trade within the 147.00–149.50 band, with any breakout dictating the September trend. Political instability in Tokyo adds another unpredictable layer that could exacerbate yen volatility if Ishiba faces mounting calls to step down.

That's TradingNEWS