• US nonfarm payrolls report revealed an increase of 209,000 jobs in June.

• Previously anticipated Fed rate cuts in 2023 now appear unlikely.

• Speculators hold a significant short position in the yen, valued at $9.793 billion.

Today’s USD/JPY outlook is bearish. The yen extended gains on Monday after surging on Friday amid dollar weakness. On Friday, the dollar experienced a decline following the release of the US nonfarm payrolls report.

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Notably, the report revealed an increase of 209,000 jobs in June. This figure fell short of market expectations for the first time in 15 months. However, it also highlighted persistent strong wage growth, reinforcing market expectations for an upcoming rate hike this month. Furthermore, it reassured the markets that the Fed’s rate hikes program may end soon. Still, previously anticipated rate cuts in 2023 now appear unlikely.

Meanwhile, the yen surged due to concerns over the 10-year Treasury yield surpassing 4%. The pair is particularly sensitive to US yields, which declined after the release of the jobs data. 

As a result, the yen strengthened against the US currency, reaching a two-week high. The increase in the 10-year Treasury yield above 4% raised market concerns about potential intervention by Japan in currency markets.

Elsewhere, weekly data from the US regulator showed that speculators currently maintain a significant short position in the yen, valued at $9.793 billion. This represents the largest short position since May 2022 and has nearly doubled in size within the past three months alone.

With a market focus on central bank policies, particularly the US Federal Reserve, attention now shifts to the upcoming US inflation data. 

USD/JPY key events today

Investors do not expect any key economic releases today that might significantly impact USD/JPY. Therefore, the pair might extend Friday’s losses.

USD/JPY technical outlook: Significant bearish momentum points to a new direction.

On the charts, USD/JPY recovered slightly after collapsing to the 142.01 support level. However, the rebound failed to surpass the 143.00 resistance level as bears returned to continue the collapse. 

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The bearish bias is strong as the price is currently well below the 30-SMA. Furthermore, bearish momentum has recently increased, with the RSI getting oversold for the first time in a while. Therefore, bears are strong, and they will likely look to break below the 142.01 support level. They might soon retest the 141.25 support.

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