USD/JPY approaches 148.00 due to moderation in Japanese wages

• The USD/JPY pair rose towards 147.70, losing 0.30%.
• USD retreats and DXY index consolidates after hitting a multi-month high at 105.15.
• Japan released soft GDP and Profit figures, so the BOJ will not be forced to pivot.

USD/JPY rose towards 147.70 on Friday after Japan reported disappointing data during the Asian session, and the pair is poised to close with a 1% weekly gain. On the USD side, it retreats, consolidating its weekly gains, but the US Dollar Index (DXY) continues to trade at multi-month highs.

Regarding data, no relevant data will be published for either country for the remainder of the session. On the US side, attention is focused on the Consumer Price Index (CPI) figures for August next week, which will be important for the Federal Reserve (Fed) in the face of decisions in November and December.

For the moment, economic activity in the US has been resilient, driven by the strength of the services sector, while the labor market, through non-farm payrolls, showed a mixed outlook, with an acceleration in creation employment and a rebound in wage inflation in August. It is worth reminding readers that the president of the Federal Reserve (Fed), Jerome Powell, has stated that the entity expects the economy to cool and that it will maintain its restrictive monetary policy as long as inflation does not recede.

According to CME’s FedWatch tool, the odds of a 25 basis point (bp) hike in November and December are close to 40%, with rate cuts expected between June and July 2024.

On the yen side, the Japanese Cabinet Office revealed that the country’s gross domestic product (GDP) growth in the second quarter was 1.2% quarterly, down from the previous reading of 1.5% and below expectations. expectations of 1.3%. In annual terms, the growth rate was 4.8%, below 6% and below the markets consensus of 5.5%. Finally, Japanese Labor Net Earnings in July, closely followed by the Bank of Japan, rose 1.3%, in line with expectations, but were down from 2.3% in the previous reading.

Lately, the BOJ has been signaling that unless wage and inflation figures meet its forecasts, it will maintain its dovish stance and monetary policy divergences could continue to act as a tailwind for the pair.

USD/JPY levels to watch

With the Relative Strength Index (RSI) and Moving Average Divergence (MACD) comfortably in positive territory on the daily chart, USD/JPY buyers have the upper hand. However, indicators are approaching overbought conditions, which could lead to a healthy technical correction in the near term. On the other hand, the pair is above the 20,100,200-day SMA, indicating a dominant position for the bulls in the bigger picture.

Support levels: 146.00, 144.80, 144.00.

Resistance levels: 148.00, 148.50, 149.00.

USD/JPY Daily Chart