USD/JPY slumps below 161.00, US NFP data looms

• USD/JPY faces some selling pressure near 160.65 in Friday’s Asian session. 
• The verbal intervention from Japanese authorities provides some support to the JPY. 
• Rising odds of Fed rate cuts weigh on the US Dollar, while Fed’s cautious tone might cap the USD’s downside. 

The USD/JPY pair atrracts some sellers around 160.65 during the  Asian session on Friday. The sell-off in the pair is driven by verbal intervention from Japanese authorities and softer US Dollar (USD). The US June Nonfarm Payrolls (NFP) will be in the spotlight on Friday, which is expected to show 190K jobs added in June. 

Japan’s Finance Minister Shunichi Suzuki said on Friday that the weak Japanese Yen (JPY) is pushing up import costs and having an impact on prices. Suzuki further stated that he“will closely monitor stock and forex markets with vigilance.” This verbal intervention lifts the JPY and acts as a headwind for USD/JPY. 

However, any significant appreciation of JPY might be limited amid a dovish stance by the Bank of Japan (BoJ). The Japanese central bank remains reluctant to provide a detailed plan for the reduction of bond purchases and further rate hikes. 

On the USD’s front, the rising odds that the US Fed will start easing the cycle in September drags the Greenback to over a three-week low around the 105.00 support level. According to the CME FedWatch Tool, financial markets are now pricing in nearly 70% odds for a 25 basis points (bps) Fed rate cut in September, up from 58.2% last Friday, according to the CME FedWatch Tool.

On the other hand, the cautious stance from the Fed officials and the June FOMC policy meeting might boost the USD. Fed officials lacked the confidence they needed to cut the interest rate, while several policymakers stated that it’s necessary to hike again if inflation were to rebound.