USD/JPY extends losses below 134.00 on lower consensus for US NFP

• USD/JPY has surrendered the cushion of 134.00 firmly and is likely to extend losses ahead.
• Fed policymaker has trimmed the odds of rate hikes in CY2023.
• CIBC has come forward with a target of 132 by year-end for the USD/JPY pair.

The USD/JPY pair has slipped below the critical support of 134.00 swiftly. Earlier, the asset displayed a gradual corrective action after printing a high of 134.55 on Wednesday.

Federal Reserve (Fed) policymakers are back with hawkish commentary on interest rates despite elevating the same to 2.25-2.50% from the ground in the past four monetary policy meetings. Minneapolis Fed President Neel Kashkari highlighted the fact that the Fed was too slow to hike interest rates in 2021. Also, added that Fed is laser-focused on bringing inflation down and a rate hike scenario in CY2023 is unlikely. Therefore, the Fed will exploit its entire weapons this year.

Well, the investing community is always been blaming Fed for displaying a late response to soaring price pressures. Now, the inflation rate is beyond control as the catalyst has not responded well to higher rate hikes by not displaying any exhaustion signals yet.

Going forward, the release of the US Nonfarm Payrolls (NFP) will hog the limelight. As per the market estimates, the US economy has failed to outperform June’s job additions numbers and has added 250k jobs in the labor market in July. Also, the Unemployment Rate is seen flat at 3.6%.

On the Tokyo front, the Bank of Japan (BOJ)’s ultra-loose monetary policy has kept the Japanese yen dependent on other currencies. Analysts at CIBC consider that the decision of the BOJ to continue with its easing policy will keep the yen limited. They forecast the USD/JPY pair at 135 by the end of the third quarter and at 132 by year-end.