• The USD/JPY forecast indicates a slight recovery in the dollar.

• The economy added only 73,000 jobs in July.

• The BoJ has been more confident in talks of resuming rate hikes.

The USD/JPY forecast indicates a slight recovery in the dollar after a steep decline in the previous session due to downbeat employment numbers. Meanwhile, the yen found support in talks of the BoJ continuing its monetary tightening. 

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The dollar had a bad end to the week after the US released a downbeat monthly employment report. The economy added only 73,000 jobs in July, missing the forecast of 106,000. At the same time, the unemployment rate increased to 4.2%. Meanwhile, figures for the previous two months were revised sharply lower. Consequently, market and expert expectations for a September rate cut jumped.

“We pull forward our baseline call for a 25 bps cut from the FOMC to September,” said David Doyle, head of economics at Macquarie Group.

“While we don’t see significant further weakness in the labour market, the results of this report are likely to shift the FOMC’s assessment of the balance of risks to the outlook.”

Meanwhile, since the US-Japan trade deal, the BoJ has been more confident in talks of resuming rate hikes. This has supported the yen. However, the timing for hikes remains a mystery.

USD/JPY key events today

Market participants do not expect high-impact releases from Japan or the US. Therefore, the pair might have a slow start to the week.

USD/JPY technical forecast: Bears take a break after SMA break

On the technical side, the USD/JPY price is recovering after a steep collapse on Friday. However, the price still trades far below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades below 50, indicating solid bearish momentum. 

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Initially, bulls were in the lead, and the price had broken above the 149.01 key resistance level. However, bears appeared suddenly as the rally neared the 151.01 key level. The price made a solid bearish candle that broke back below the 149.01 level and the 30-SMA. This signaled a shift in sentiment. Since then, the price has made fresh lows below the SMA.

A pullback might retest the SMA and the 149.01 level before the new downtrend continues. In this case, USD/JPY might soon retest the 146.00 support level.

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