USD/JPY breaks above 130.70, looks at multi-year highs

• US dollar gains momentum across the board after the US employment report.
• Japanese yen under pressure even as Wall Street extends losses.
• USD/JPY heads for the highest weekly close since 2002.

The USD/JPY jumped following the release of the US employment report and recently rose further hitting a fresh three-week high at 130.73. It remains near the top, on its way to the highest weekly close since 2002.

Yields and dollar boost USD/JPY

The yen is among the worst performers on Friday despite the cautious tone in Wall Street. The Dow Jones is falling by 1.04% and the Nasdaq by 2.61%. Despite all the red, US yields are higher and the yen is sharply lower.

Economic data from the US came in mixed. Non-farm payrolls rose by 390K in May above the 325K of market consensus and the unemployment rate remained at 3.6% (consensus: 3.5%). “Improving labor supply and cooling wage growth are welcome signs for the Federal Reserve, but today's employment report is just one step along the rocky road to normalcy”, explained analysts at Wells Fargo.

A later report showed ISM Service PMI dropped from 57.1 to 55.9 in May, below the 56.4 expected. The greenback was unaffected, although US yields moved off daily highs.

Best week in months for USD/JPY

The USD/JPY is up more than 350 pips for the week so far and could post the highest weekly close since April, boosted by US yields.

“Fed policy is the determinant for the USD/JPY because the BoJ effectively has no policy. It is not at all clear that US rates can continue higher given the unsettled state of the US economy but the current spread is more than enough to provide the USD/JPY with support”, said Joseph Trevisani, Senior Analist at FXStreet.  

Technical levels