USD/JPY sees a downside to near 132.00 ahead of US NFP

• USD/JPY is expected to shift lower to bear 132.00 on a lower consensus for US NFP.
• Fed policymakers have come forward with a new target of above 4% for interest rates.
• Japan’s Overall Household Spending has increased significantly to 3.5%.

The USD/JPY pair is declining sharply after facing barricades around 133.00 in the Asian session. The asset has printed a low of 132.77 and is likely to drag further to near 132.00 as investors are expecting a vulnerable performance from the US Nonfarm Payrolls (NFP) data.

After the consensus of 250k job addition in the month of July, economists at JP Morgan predict the US Nonfarm Payrolls (NFP) to come in weaker at 200K in July’s labor market report. In the month of June, the US economy added 372k jobs in the labor market. A continuous slash in job creation data is advocating severe pressure on the labor market. However, the jobless rate will remain stable at 3.6%.

Rising interest rates and its multiplier effects have triggered downside risks in the labor market activities. The corporate players are unable to invest unhesitatingly due to costly dollars. Therefore, lower investment opportunities are unable to accelerate the employment generation process.

The US dollar index (DXY) has surrendered the support of 106.00 despite the higher targets for interest rates by Federal Reserve (Fed) policymakers. Cleveland Fed President Loretta J. Mester is seeing interest rates above 4% as halting the policy tightening program without finding a slowdown in the inflation rate for months is not feasible.

On the Tokyo front, the Overall Household Spending has improved dramatically to 3.5% from the prior release of -0.5% and the expectations of 1.5%. This may support the yen bulls as the economic data is an inflation indicator. A decent improvement in the economic data advocates that the inflation rate may accelerate further. However, the data could be driven majorly by soaring energy bills. Still, to keep the inflation rate above 2%, an increase in Labor Cost Index is imminent.