The US dollar extended its decline on Tuesday alongside a further slide in the US 2-year yield, with losses most pronounced against the Japanese yen. Softer US retail sales reinforced last week’s repricing of Federal Reserve policy expectations, lifting implied odds of a rate cut at the next meeting to around 22%, up from roughly 5% a week earlier.
In Japan, Sanae Takaichi’s election win delivered a super-majority that reduced political uncertainty without altering the Bank of Japan’s gradual normalisation path. Against the backdrop of falling US yields and stretched positioning, that loss of resistance was enough to trigger a sharp yen rebound, sending USD/JPY down 1% on Tuesday after a 0.8% decline on Monday.
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USD/JPY and Yen Crosses Signal Risk Ahead of NFP
In fact, the Japanese yen is the strongest currency of the week so far, rising against all FX majors. While the yen is clearly the dominant force for bulls, I am keeping a close eye on GBP/JPY, EUR/JKPY and CAD/JPY as they display the best potential for deeper retracements on the daily timeframe. Meanwhile, the selloff on USD?JPY has stalled at support ahead of today’s NFP report. Though whether it bounces or not after I suspect the downside now seems more likely beyond the jobs report.
Source: TradingView, ICE
- GBP/JPY led the declines on Tuesday after Keir Starmer refused to step down despite mounting pressure linked to the Epstein–Mandelson connection, sending the cross to an 8-day low.
- USD/JPY extended its slide for a second day, down 1.8% so far this week.
- CAD/JPY formed an evening star reversal, a classic three-day bearish reversal pattern.
- EUR/JPY fell around 1%, hinting at a lower high beneath its record peak and a potential daily top.
- CHF/JPY printed a rare bearish outside day at record highs, though the broader trend remains strong — making the Swiss franc a tougher sell than other yen crosses.
- AUD/JPY also formed an evening star formation, but unlike GBP/JPY and EUR/JPY, it lacks a broader topping structure.
USD/JPY Technical Analysis: US Dollar vs Japanese Yen
The daily chart show momentum has clearly realigned with the January selloff, with USD/JPY now trying to hold above the December low (154.34) and January VPOC (153.9). It could make a decent level for a bounce for USD/JPY if NFP surprises to the upside, though I suspect any such bounce could be limited given bears are clearly back.
Bears might seek to fade into moves towards the 155 handle or monthly pivot point (155.43) in anticipation of an eventual move back to the January low. But if NFP disappoints, it could send the dollar sharply lower and drag USD/JPY with it for the ride.
Source: TradingView, ICE
NFP Leans Heavily on Healthcare Hiring
Healthcare remains a critical swing factor in the nonfarm payrolls report, having shouldered an outsized share of recent headline job growth. In the latest reading, healthcare and social assistance added 38.5k jobs, accounting for 77% of total payroll gains and around two-thirds of private-sector services growth.
This concentration matters. While healthcare hasn’t always dominated the NFP mix, its role has grown as broader hiring momentum has cooled, even as healthcare hiring has remained relatively steady. Still, the latest 38.5k gain sits well below its 13-month average of 60.6k. Any further slippage would leave headline payrolls increasingly exposed and could reinforce concerns that overall job growth is losing traction.
Ultimately, a weak print in healthcare could result in a notably headline jobs number.
Source: BLS
View the full economic calendar
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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