USD/JPY attempts a recovery below 132.00 as risk-off rebound ahead of US NFP

• USD/JPY has rebounded after dropping below 132.00 as investors have shifted their stance to a risk-off mood.
• Upbeat US payroll data would serve as a reason for the continuation of hawkish policy by the Fed.
• The BOJ may continue to ease policy further to achieve higher inflation targets.

The USD/JPY pair has picked bids after a corrective move below the crucial support of 132.00 in the Tokyo session. The asset has displayed a recovery as the risk-off impulse has rebounded firmly amid soaring anxiety ahead of the United States Employment data.

S&P500 has sensed immense pressure as an expression of upbeat employment addition in the United States economy could serve as a reason for the continuation of hawkish monetary policy by the Federal Reserve (Fed) for the entire CY2023. The US Dollar Index has squared off its entire morning gains and is looking to recapture the immediate resistance of 104.00. Meanwhile, the 10-year US Treasury yields have also rebounded to near 3.72%.

Friday’s US Nonfarm Payrolls (NFP) data will be keenly watched by the market participants. As per the consensus, the US labor market has witnessed an addition of fresh payrolls of 200K in December against 263K reported earlier. The Unemployment Rate is seen unchanged at 3.7%.

Although inflation has been softened in the past few months led by higher interest rates, the Fed is still worried that the low jobless rate could spurt the price index again. The sheer demand for labor would be compensated by higher wages, which would result in higher retail demand as individuals will have more money in pockets for disposal.

Before the release of the official US employment data, investors will look after Automatic Data Processing (ADP) Employment Change data, which is seen higher at 150K against the prior figure of 127K.

On the Tokyo front, the Bank of Japan (BoJ) is likely to raise fiscal 2022 and 2023 forecasts for the core Consumer Price Index (CPI) in its new quarterly projections, as reported by Reuters. A scenario of a higher inflation forecast will fade rumors of policy shift as higher inflation will be augmented by more policy easing measures from the central bank.