USD/JPY jumps to fresh daily high, eyes 130.00 mark on mostly upbeat NFP report

The USD/JPY pair catches some bids during the early North American session and spikes to a fresh daily top, around the 129.80 region in reaction to th  |  03/02/2023 13:44

• USD/JPY rallies around 150 pips in reaction to the mostly upbeat US employment report details.
• The US economy added 517K new jobs in January and the jobless rate dropped to 3.4%.
• A weaker risk tone, hawkish BoJ expectations could lend support to the JPY and cap gains.

The USD/JPY pair catches some bids during the early North American session and spikes to a fresh daily top around the 129.80 region in reaction to the mostly upbeat US employment report details.

In fact, the headline NFP showed that the US economy added 517K jobs in January, surpassing even the most optimistic estimates. Adding to this, the unemployment rate unexpectedly edged down to 3.4% during the reported month from 3.5% in December. The data further points to the underlying strength in the US labor market, which should allow the Fed to stick to its hawkish stance. This, in turn, provides a strong boost to the US Dollar and is seen as a key factor behind the USD/JPY pair's sharp rally of around 150 pips in the last hour.

At the same time, a combination of factors lends some support to the Japanese Yen (JPY) and fails to assist spot prices to build on the momentum beyond the 200-hour SMA. Diminishing odds for an imminent pause o the Fed's rate-hiking cycle take a toll on the global risk sentiment, which is evident from a weaker tone around the equity markets. This, along with speculations that high inflation may invite a more hawkish stance from the Bank of Japan (BoJ) later this year, underpins the safe-haven JPY and keeps a lid on any further gains for the USD/JPY pair.

Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the intraday positive move. Nevertheless, the USD/JPY pair, for now, seems to have erased its modest weekly losses and remains at the mercy of the USD price dynamics.

Technical levels to watch