USD/JPY edges higher on hot US jobs market data

• USD/JPY modestly gains, driven by robust US labor market and global central bank rate cut policies.
• Tight US labor market evident in Initial Jobless Claims; 4.11% stable US 10-year Treasury yield moderates USD rise.
• Contrasting economic indicators: Mixed US housing data and weak Japanese machinery orders affect USD/JPY.

The USD/JPY registered modest gains on Thursday as economic data released by the US Department of Labor (DoL) shows the labor market is running hot amid higher interest rates set by the Federal Reserve. That, along with global central bank speakers pushing back against rate-cut bets by traders, triggered a rise in US treasury yields since Tuesday. Nevertheless, as the North American session begins, US yields are dragged down, and the major aims higher 0.05%, trading at 148.12.

Strong US labor market data caps US 10-year T-note yield losses, boosts USD/JPY

The US economy remains resilient, as shown by data revealed so far during the week. Today, Initial Jobless Claims for the week ending January 13 increased by 187K, less than the previous week and the consensus of 207K, an indication of a tight labor market. Nevertheless, the latest Beige Book released on Wednesday by the Fed showed that “nearly all districts cited one or more signs of a cooling labor market.”

At the same time, US housing data was mixed, with Binding Permits rising 1.9% or 1.495 million, compared with November’s 1.467 million, and exceeded forecasts of 1.48 million. On the contrary, Housing Starts dropped from 1.525 million in November to 1.46 million in December, a contraction of -4.3%, revealed the US Commerce Department.

Following the data, the USD/JPY witnessed a slight recovery, while the US 10-year Treasury note yield is almost flat at 4.11%, helping the Greenback’s (USD) to cap earlier losses against the Japanese Yen (JPY).

On the Japanese front, Machinery orders came soft at -4.9% MoM, plunged more than the -0.8% estimated by analysts in October, while annual base figures plummeted -5.0% vs. 0.1% foreseen. IT should be said it’s the weakest report since August, and recent data has brushed aside the chances of the Bank of Japan (BoJ) to normalize monetary policy.

USD/JPY Price Analysis: Technical outlook

Three days ago, the USD/JPY broke above the Ichimoku Cloud (Kumo) a further confirmation of the bullishness of the pair, but it has fallen short of cracking the next cycle high at 148.52, ahead of challenging 149.00. A further upside is seen at the 150.00 psychological figure. However, a downward retracement could happen if sellers push prices below the January 17 low of 147.05, which would exacerbate a downward move toward the top of the Kumo at 146.76 before dropping to the Senkou Span B at 146.08.