Strong US jobs data fails to curb Japanese Yen gains

• At around 158.25, USD/JPY trades lower in early Asian trading on Monday.
• Minutes from the BoJ meeting indicated a readiness among policymakers to step up monetary tightening.
• October brought a 165,000 increase in US NFP and a fall in the Unemployment Rate to 4.1%.

Bank of Japan (BOJ) meeting minutes signal that policymakers are ready to quicken the pace of monetary tightening, lending modest support to the Japanese Yen (JPY) against the US Dollar (USD). Against that backdrop, USD/JPY slips towards 158.25 in Monday’s early Asian session.

Although the BoJ left interest rates unchanged last month, its emphasis on tackling inflation risks strengthened market expectations of a December increase. Minutes from the September meeting, published on Thursday, showed that most BoJ policymakers considered further rate rises appropriate as underlying inflation moved towards the central bank’s 2% target.

A December rate rise is expected to be followed by further increases in borrowing costs next year until they reach 2%, former BoJ top economist Seisaku Kameda said on Friday. He said the central bank was expected to take these steps to counter mounting inflationary pressure.

A gain of 165,000 in October US Nonfarm Payrolls (NFP) substantially exceeded the forecast increase of 65,000, figures released on Friday by the US Bureau of Labor Statistics (BLS) showed. September had recorded an increase of 60,000. Meanwhile, the US Unemployment Rate declined from 4.2% in September to 4.1% in October.

With US employment figures exceeding expectations, the Federal Reserve (Fed) remains on course for a December interest rate rise. Kathy Bostjancic, chief economist at Nationwide, said: "The labor market is heating up across-the-board and supports our view that the Fed will raise the policy rate again in December,"

According to the CME FedWatch tool, markets assigned roughly a 79.6% probability to a rate increase at the US central bank’s meeting next month. That compared with 72.8% before the release of the US employment report.

Yen advances as safe-haven demand and BoJ normalisation expectations offer support

The latest episode of risk aversion saw “haven demand favoured the JPY over the USD”, according to strategists at ABN Amro. Their assessment notes that the “DXY Index was unchanged at 101.6 despite the equity rout, as falling US yields eroded the greenback’s appeal.” Support for the Yen, by contrast, came from both safe-haven flows and domestic monetary policy signals. ABN Amro observed that “the JPY appreciated by 0.5% to 157.70 per USD, underpinned by the Bank of Japan minutes, which reinforced expectations of further normalisation.”

Daly’s focus on inflation strengthens the Fed’s hawkish bias

An FXS Speechtracker score of 8/10, against an established baseline of 6.4/10, reflects a distinctly more hawkish message from the Fed’s Daly and a greater focus on tightening risks. Her central point is that inflation remains the number 1 priority: although the employment report is “good news” and wage growth “isn’t booming,” real wages are declining and inflation has been “high for too long,” warranting further policy tightening despite labour market resilience. By stressing that a strong labour market leaves the Fed room to act, alongside a willingness to increase rates if necessary, Daly’s remarks favour a stronger DOLLAR and put risk assets on notice.

Following a 0.95-point increase, the FXS Fed Sentiment Index reached 143.10, comfortably above the neutral threshold of 100. This firmly hawkish level is consistent with the elevated FXS Speechtracker score. Despite acknowledged uncertainty surrounding tariffs, war and AI, the rise suggests that markets’ prevailing interpretation is that the Fed still leans towards further tightening. That environment should continue to support the DOLLAR against the EURO and YEN.

Technical Analysis: USD/JPY struggles to clear the 100-day SMA

A narrow trading range persists on the USD/JPY daily chart, with the pair sitting just below the 100-day Simple Moving Average (SMA) and above the Bollinger Bands’ middle line. With the upper Bollinger Band and the 100-day SMA limiting gains overhead, the broader picture remains range-bound. A Relative Strength Index (14) reading of 52.93 points to slightly positive momentum, though without a clear directional signal.

The upper Bollinger Band at 158.95 provides the first nearby resistance, ahead of the 100-day SMA at 159.05. A daily close above that moving average would be required to open the way for a more decisive advance. Initial support lies at the Bollinger middle band at 157.95, followed by the lower band around 156.95. A break beneath that lower boundary would turn attention to a broader corrective phase for the pair.

(The technical analysis of this story was written with the help of an AI tool. Find out more.)