USDJPY bounces off daily lows, remains bearish below 147.50

• USDJPY is under some selling pressure amid broad dollar weakness.
• Mixed US employment data does not impress USD bulls nor lends it any support.
• The risk appetite boost and the divergence between the policies of the Fed and the Bank of Japan should limit the fall.

The USDJPY pair is under some selling pressure during the first hour of the North American session and falls to a new daily low in the last hour. However, the pair quickly recovers a few points from levels below 147.00, although it remains in negative territory amid the strongly offered tone surrounding the US dollar.

In fact, the dollar index pulls back further from two-week highs hit the previous day, in reaction to mixed monthly employment data in the US, which, in turn, is seen to put pressure on the pair. USDJPY. The widely followed NFP report showed the US economy added 261,000 new jobs in October, against an estimated 200,000. Furthermore, the previous month’s reading was also revised higher to 315,000 from 263,000. However, the slight disappointment in the unemployment rate, which rose to 3.7%, overshadowed the overall positive data and weighed on the dollar.

Also, speculation that the Japanese authorities could intervene again to smooth out any sharp drop in the domestic currency add to the offered tone surrounding the USDJPY pair. That said, risk appetite momentum – as evidenced by a strong rally in equity markets – should keep a cap on any further gains for the safe-haven JPY. Also, the more aggressive stance from the Federal Reserve should be a stimulus for the dollar. This, in turn, should help limit the decline in major pairs and warrants some caution for aggressive bear traders.

Fed Chairman Jerome Powell, it should be remembered, shot down expectations of a dovish pivot, saying on Wednesday that it was premature to talk of a pause in the rate-hike cycle. Powell added that the terminal rate will remain higher than anticipated, which remains supportive of elevated US Treasury yields. In contrast, the Bank of Japan has so far shown no inclination to raise interest rates and has reiterated that it will continue to guide the 10-year bond yield to 0%. This translates into a further widening of the US-Japan rate spread and favors USDJPY bulls.

Technical levels to watch