Later in the session on Monday, investors should monitor Fed speakers after last week’s labor market data. Their reactions to the Jobs Report and insights into the timeline for a rate cut could influence US dollar demand.
Dovish calls for multiple rate cuts to support the economy will likely pull USD/JPY toward 142.5. Conversely, hawkish cues, favoring delays in policy moves, may fuel US dollar demand, driving the pair toward 145.
On Thursday, July 3, an upbeat US Jobs Report sank bets on a Q3 Fed rate cut. According to the CME FedWatch Tool, the chances of a September Fed rate cut fell from 91.4% on June 27 to 69.4% on July 4. The chances of a September rate cut had peaked at a weekly high of 96% ahead of the US Jobs Report.
USD/JPY: Key Scenarios to Watch
Bearish USD/JPY Scenario: A US-Japan trade deal, strong Japanese wage growth, hawkish BoJ cues, or dovish Fed cues. Such factors could drag USD/JPY toward 142.5.
Bullish USD/JPY Scenario: Higher US tariffs on Japan, softer Japanese data, dovish BoJ signals, or hawkish Fed chatter. These may push the pair above the 50-day EMA toward 145.
