USDJPY Retreats Before Next Bounce As Japanese Earnings Slow

USDJPY has gained nearly 10 cents since the September lows under 140, but it is facing obstacles above now, which will make the upside more difficult. The fortunes for this pair have shifted, with the new Japanese prime minister not asking for rate hikes from the BOJ, while the USD buyers have returned after the US employment reports last week and Powell’s comments.

USD/JPY experienced a significant decline of over 22 cents during the summer, driven by the unwinding of the carry trade. However, a strong 7-cent rally last week brought the pair closer to the 50% Fibonacci retracement level from the 162.00 to 139.50 drop. The target for this retracement sits at 151.80, but the pair first faces resistance from the 100-day SMA (marked in red) at 149.40, which aligns with the peak reached during the mid-August retracement.

USD/JPY Chart Daily – Buyers Hesitated at Resistance

Whether buyers can push beyond this level will be pivotal, especially with the Bank of Japan and new governor closely monitoring developments. Last week was particularly challenging for the yen, marking its worst performance since 2020. This decline was largely influenced by the strengthening U.S. dollar, which gained 2 cents on Friday following robust NFP data for September.

Additionally, political shifts in Japan, such as the appointment of a new prime minister, Ishiba, have impacted monetary policy. Initially a supporter of tightening, Ishiba has since taken a dovish stance, which has weakened the yen and further fueled the USD/JPY rally. Today we had the September earnings and spending from Japan.

Japan Earnings and Spending for September

• Labor Cash Earnings:
  • Up by 3.0% year-on-year in August (expected +3.1%), slowing from the prior increase of +3.6%.
  • Inflation-adjusted real wages fell by 0.6% year-on-year, reversing two months of gains, influenced by reduced bonuses.
• Overtime Pay:
  • Increased by 2.6% year-on-year, showing continued strength in supplementary earnings.
• Household Spending:
  • Monthly basis: Rose by 2.0% (expected +0.5%), recovering from the previous month’s decline of -1.7%.
  • Yearly basis: Decreased by 1.9%, but exceeded expectations (-2.6%), compared to the prior month’s slight gain of +0.1%.

These mixed figures reflect a combination of moderate wage growth, adjusted for inflation, and improved spending despite year-over-year declines.

USD/JPY Live Chart