Weaker-than-expected labor market data could fuel investor expectations of a September Fed rate cut. Deteriorating labor market conditions may affect wage growth, consumer confidence, and disposable income. Consumers could curb spending, dampening demand-driven inflation.

A softer inflation outlook would support a less hawkish Fed rate path.

Furthermore, investors should consider the job quit numbers. Economists expect job quits to decline from 3.329 million to 3.200 million. Employees are less likely to quit their jobs in a deteriorating labor market environment.

Other stats include factory orders. However, these will likely play second fiddle to the labor market data. The manufacturing sector accounts for less than 30% of the US economy. Nevertheless, higher-than-expected numbers could ease concerns about a hard economic landing.

Economists forecast factory orders to increase by 0.6% in April after rising by 1.6% in March.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on service sector PMI, household spending numbers from Japan, and the US Jobs Report. A jump in US service sector activity and tighter US labor market conditions could tilt monetary policy divergence toward the US dollar.

USD/JPY Price Action

Daily Chart

The USD/JPY sat above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY break above the 156.5 handle could give the bulls a run at the 158 handle. Furthermore, a USD/JPY return to the 158 handle could signal a rise to the April 29 high of 160.209.

Bank of Japan commentary and US labor market data need investor consideration.

Conversely, a USD/JPY break below the 155.5 handle could give the bears a run at the 50-day EMA.

The 14-day RSI at 51.15 suggests a USD/JPY move to the April 29 high of 160.209 before entering overbought territory.