USD/JPY cleared daily losses following ADP data from July

• USD/JPY trades flat at 143.35 after finding support at a low of 142.22.
• According to ADP, the number of employed people rose by 324k in July.
• Rising yields allowed the USD to gain traction.

On Wednesday, the USD gained traction following hot labour market data from the US. The DXY index trades rose above the 100-day Simple Moving Average towards 102.70, its highest level since early July.

Automatic Data Processing Inc. (ADP) revealed that the number of employed people in the US was 324,000 in July, higher than the 189,000 expected but lower than the revised figure of 455,000 in June. 

As a reaction, US bond yields are rising across the board. The 2-year yield jumped to 4.92%, while the 5 and 10-year yields to 4.26% and 4.10%, respectively, with the latter increasing by more than 1%. Regarding bets on the Federal Reserve (Fed), according to the CME FedWatch tool, markets are confident that the Federal Open Market Committee (FOMC) won’t hike in September but started low bets on a 50 basis point hike (bps) in the November meeting. In addition, the odds of a lower hike of 25 bps stand around 25%.

Focus now shifts to Jobless Claims data on Thursday and Nonfarm Payrolls on Friday, as Jerome Powell clearly stated that ongoing decisions will depend “solely” on incoming data.

USD/JPY Levels to watch 

Based on the daily chart, the USD/JPY exhibits a bullish outlook for the short term. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in positive territory, with the RSI above its midline with a positive slope. The MACD is also displaying green bars, indicating a strengthening bullish momentum.

Resistance levels: 143.50, 144.00, 144.50.
Support levels: 142.30,140.70 (20-day SMA), 140.00.

USD/JPY Daily chart