USD/JPY flat-lines around 141.65 area, just above Friday’s post-NFP swing low

• USD/JPY struggles to preserve its modest intraday gains and hangs just above Friday’s swing low.
• The unimpressive US jobs report keeps the USD bulls on the defensive and acts as a headwind.
• Bets for more Fed rate hikes limit the USD losses and lend support amid the BoJ’s dovish stance.

The USD/JPY pair surrenders its modest Asian session gains to the 142.00 neighbourhood and retreats to the lower end of the intraday range in the last hour. Spot prices currently trade around the 141.65 region, just a few pips above the multi-day low touched on Friday in the aftermath of the rather unimpressive US monthly employment details.

It is worth recalling that the headline NFP showed that the US economy added 187K jobs in July, lower than the 200K anticipated. Furthermore, the readings for May and June were revised down, which suggested that demand for workers was slowing. This, in turn, halted the recent surge in Treasury yields, which keeps the US Dollar (USD) bulls on the defensive for the third successive day on Monday and turns out to be a key factor acting as a headwind for the USD/JPY pair.

That said, solid wage gains and a dip in the unemployment rate to 3.5% signalled continued tightness in the labour market. This, along with hopes for a soft economic landing, reaffirms expectations that the Federal Reserve (Fed) will keep rates higher for longer and limit losses for the Greenback. Apart from this, the Bank of Japan’s (BoJ) dovish stance continues to undermine the Japanese Yen (JPY) and holds back traders from placing bearish bets around the USD/JPY pair.

In fact, the Summary of Opinions from the BoJ’s July monetary policy revealed that one member reiterated the need to patiently continue with the current monetary easing towards achieving the price stability target. Another member noted that there is still a significantly long way to go before revising the negative interest rate policy. Moreover, BoJ Governor Kazuo Ueda had said recently that the central bank won’t hesitate to ease policy further if needed.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before positioning for an extension of last week’s retracement slide from the vicinity of the 144.00 mark, or the highest level since July 7. Moving ahead, traders now look to speeches by influential FOMC members for some impetus later during the early North American session in the absence of any relevant market-moving economic releases from the US.

Technical levels to watch