USD/JPY traces sluggish yields around 130.00 with eyes on US NFP, Biden

• USD/JPY extends rebound from daily low, reverses pullback from three-week top.
• Mixed concerns, pre-NFP anxiety restrict market moves.
• BOJ’s Kuroda reiterates his strong support for easy money, Japan PMI came in firmer.
• Downbeat signals for US NFP weigh on prices, Biden’s speech, ISM Services PMI also become important.

USD/JPY picks up bids towards intraday high during the sluggish Friday morning in Europe as traders await the key US data/events. Also restricting the yen pair’s immediate moves is the lack of major data/events amid the Asian session, as well as holidays in the UK and China.

The market’s pre-NFP caution appears at a peak this time as the recent downbeat signals for today’s US employment report for May contrast the hawkish Fedspeak.

That said, the US ADP Employment Change eased to 128K for May, versus 300K forecasts and a downwardly revised 202K previous reading. The Weekly US Initial Jobless Claims, on the other hand, dropped to 200K compared to 210K anticipated and 211K prior. Further, Nonfarm Productivity and Unit Labor Costs both improved in Q1, to -7.3% and 12.6% respectively, compared to -7.5% and 11.6% figures for market consensus.

On the contrary, Federal Reserve Vice-Chair Lael Brainard and Cleveland Fed President Loretta Mester repeated the statements suggesting higher odds favoring the Fed’s aggression in rate hikes.

It should be observed that the contrast between the risk-negative headlines concerning China and BOJ Governor Haruhiko Kuroda’s latest comments also challenge the USD/JPY moves.

Deputy US Trade Representative (USTR) Sarah Bianchi seemed to have offered the latest challenge to market sentiment, as well as to the bright metal, as the diplomat said, “USTR is seeking a 'strategic realignment' with China, tariff structure that 'makes sense'.” The mood was challenged by statements like, “‘All options are on the table’ regarding tariff decisions on Chinese imports.” USTR Bianchi also suggested faster trade talks with Taiwan which may not be liked by China and hence challenge the bullion prices. On the same line were statements from China’s Foreign Ministry spokesman Zhao Lijian who conveyed dislike for the US’ law banning imports from Xinjiang.

Alternatively, Mr. Kuroda said, “Must maintain easy policy to create economic environment where wages can rise more.”

Amid these plays, the S&P 500 Futures print mild gains but the US 10-year Treasury yields remain unchanged at around 2.915% by the press time.

Moving on, the pre-NFP anxiety and an absence of the British traders may restrict USD/JPY moves. That said, US NFP for May, expected to ease to 325K versus 428K prior, as well as the US ISM Services PMI for May, likely to retreat from 57.1 to 56.4, will be crucial for clear directions. Also important to track will be US President Joe Biden’s speech.

Technical analysis

USD/JPY bounces off the 50-HMA inside an immediate bullish pennant chart formation.

In addition to the 50-HMA and bullish pennant, RSI conditions also suggest the USD/JPY pair’s further upside. However, a clear break of the 130.00 hurdle becomes necessary for the bulls to retake control.

On the contrary, the 50-HMA and the support line of the pennant pattern, respectively near 129.75 and 129.70, could challenge the pair’s pullback moves.