USD/JPY Seeks Break Below 136.00 Ahead of NFP Figures

• USD/JPY is expected to post further losses below 136.00 as investors have shrugged off fears of a further rate hike from the Fed.
• Biden’s proposed tax hike has diverted investor interest towards US stocks.
• Unchanged monetary policy is expected from the BOJ’s Kuroda.

The USD/JPY pair is moving sideways above 136.00 in the Asian session. The asset looks vulnerable above 136.00 and a break below it is expected as investors shrugged off fears associated with expectations of a further rate hike from the Federal Reserve (Fed).

Initial jobless claims on Thursday reported an 11% increase in the number of first-time claimants. It was the highest jump in the last five months, signaling that the US job market is not tight enough as it appears to market participants. The big jump in initial applications is believed to have been a consequence of the mid-winter school holidays in New York. Therefore, it is an isolated episode that can be ignored.

The Dollar Index (DXY) is juggling above 105.25 after a gradual correction from Wednesday’s high of 105.86. S&P 500 futures posted a sharp sell-off on Thursday as investors fretted over US President Joe Biden’s proposed high taxes on billionaires and wealthy investors. Citing the budget as a blue-collar bill, more taxes on the rich will be used for retirees’ medical claims.

Fears of the Fed’s forceful statement on using higher rates to reduce inflation also supported demand for US government bonds. The 10-year US Treasury yield fell sharply to near 3.90%.

As for the Japanese yen, investors await the Bank of Japan (BoJ) interest rate decision for further impetus. Analysts at TD Securities believe that “the BOJ is unlikely to make a move at this meeting, despite CPI inflation reaching its highest level in 41 years.” Governor Kuroda, in his last meeting, will probably keep the policy unchanged, and we will have to wait for Ueda, the new governor, starting in April. We believe that the BOJ could change the upper end of the YCC band again in the coming months, possibly as early as April.”