USD/JPY fails to hold above 114.00, hits two-day lows under 113.70

• US dollar gains momentum versus G10 currencies, but the yen is the best performer.
• USD/JPY continues to move in a two-week old range around 114.00.

The USD/JPY peaked on Thursday at 114.26 and then turned to the downside. Recently it reached a fresh daily low at 113.68, and it remains near the lows, with a clear short-term bearish bias.

The yen is the top performer amid lower US yields. The 10-year yield is at daily lows at 1.53%. US stocks are mixed in Wall Street, still holding onto most of Wednesday’s gains.

Despite the recent US economic report and the FOMC meeting, USD/JPY continues to move in a range between 113.40 and 114.40. The main trend still points north, but the dollar’s momentum eased.

After Fed, focus turns to NFP

The Federal Reserve on Wednesday announced a slowdown in its asset purchase program, as expected. Jerome Powell played down expectations about rate hikes in the short to medium term. Stocks rose, and US yields pulled back after the FOMC meeting.

Focus now turns to the US official employment to be released on Friday. The ADP report on Wednesday surpassed expectations, and on Thursday, the jobless claims report showed a new low since March 2020 for initial and continuing claims.

Regarding the NFP, analysts at TD Securities point out that a strong payrolls beat should broadly support the US dollar. “A strong payroll report is likely to reinforce the post-FOMC pricing suggesting the Fed will let inflation overshoot further. This could keep the market's pricing for hikes little changed but should lend additional support to curve steepeners and TIPS BEs.” If data sends US yields higher, USD/JPY could be among the biggest gainers.

Technical levels