The US economy created 911k fewer jobs in the 12 months to March, according to the latest Nonfarm Payrolls (NFP) revision. That equates to an average shortfall of 76k jobs per month, reinforcing expectations that the Federal Reserve (Fed) will deliver three consecutive 25bp rate cuts by December. Odds of a further 25bp cut in March have also climbed to 41%.
Yet despite dovish repricing, US Treasury yields and the dollar rose on Tuesday. The move reflects mounting fears that US economic weakness is now spilling over into the global economy. This dynamic also saw the Japanese yen attract safe-haven flows alongside the US dollar, leaving USD/JPY little changed, while other yen crosses such as AUD/JPY and GBP/JPY pulled back more sharply.
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Yen Crosses Struggle to Hold Momentum
While I suspect the Japanese yen will continue to weaken and drive yen crosses higher, short-term momentum is currently working against the bulls. For now, I’ll be watching whether these pairs can establish swing lows before attempting another bullish breakout.
Chart analysis by Matt Simpson - data source: LSEG
- EUR/JPY printed a bearish engulfing candle on Tuesday, signalling traders are not yet ready to push the cross above the July high, following Monday’s failed attempt.
- GBP/JPY slipped for a second consecutive day, again showing the British pound is not prepared for a sustained breakout above the key 200.00 level.
- CHF/JPY posted a two-bar bearish reversal at the July high, with the Swiss franc effectively ceding its safe-haven role to the yen for the day.
- CAD/JPY also declined, though buyers defended the 200-day SMA. With prices still holding above the August low, the Canadian dollar could mount a rebound against the yen.
Japanese Yen Correlation Analysis: USD/JPY, Nikkei 225, Yields
The positive correlation between USD/JPY, the Nikkei and US–Japan yield differentials has effectively broken down since Trump watered down his own tariffs back in April. From January 2024 through April 2025, the Nikkei and the yield spread consistently tracked USD/JPY higher and lower. Yet today, the Nikkei continues to set record highs while yield differentials collapse and USD/JPY drifts sideways within a well-established range.
This may not be particularly glamorous for USD/JPY traders, but with classic correlations failing to hold, range-trading strategies remain the most suitable approach. In short, sideways action could stay the dominant theme for the US dollar against the Japanese yen.
Chart analysis by Matt Simpson - data source: LSEG
USD/JPY Technical Analysis: US Dollar vs Japanese Yen
The daily chart shows USD/JPY consolidating through most of August and September, bouncing between two weekly VPOCs (volume point of controls) at 146.52 and 148.50. The case for a downside break has weakened after Tuesday’s elongated bullish pinbar, suggesting bulls may be preparing to scoop up discounts near the lower end of the range. Pullbacks towards 147 could therefore attract buyers, targeting 148.00 initially and potentially the highs around 148.50.
Fundamentals are also tilting in favour of yen weakness. The resignation of Japan’s Prime Minister has reduced the likelihood of the Bank of Japan pursuing a rate hike, undermining Japanese yen strength. At the same time, if US economic data continues to soften, the US dollar could still attract safe-haven demand despite increasingly dovish rate expectations. Together, these factors open the door for USD/JPY to break above 149, with 150 becoming the next key upside target.
Chart analysis by Matt Simpson - data source: TradingView USD/JPY
AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen
Like the US dollar, the Australian dollar also held firm against Japanese yen strength on Tuesday, with AUD/JPY seriously eyeing the bullish breakout I warned about last week. Its 10-day rally into resistance – the strongest such run in a decade – highlights bullish intent. The brief two-day pullback further reinforces the underlying strength from buyers.
AUD/JPY now sits comfortably above its 200-day EMA, with the 20- and 50-day EMAs curling higher in a bullish sequence that signals growing near- and medium-term momentum. The 20-day EMA was also defended with a doji and swing low last Friday.
My bias remains bullish while prices hold above 96.30, potentially opening the path to the 99.00 handle, which aligns with the dual highs from January 2025.
Chart analysis by Matt Simpson - data source: TradingView AUD/JPY
Key Economic Events for Traders (AEST / GMT+10)
08:45 NZD External Migration & Visitors, Permanent/Long-Term Migration, Visitor Arrivals (Jul) (NZD/USD, AUD/NZD, NZD/JPY)
11:30 CNY CPI, PPI (Aug) (USD/CNY, AUD/CNY, CN50)
13:35 JPY 5-Year JGB Auction (USD/JPY, EUR/JPY, Nikkei 225)
19:00 EUR Greek CPI, HICP, Industrial Production (Aug/Jul) (EUR/USD, EUR/GBP, EUR/JPY)
20:00 EUR ECOFIN Meetings (EUR/USD, EUR/GBP, DAX)
21:00 USD MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Purchase Index, Mortgage Market Index, Mortgage Refinance Index (S&P 500, Nasdaq 100, USD/JPY)
21:45 CHF SNB Vice Chairman Schlegel Speaks (USD/CHF, EUR/CHF, CHF/JPY)
22:00 EUR German Buba Vice President Buch Speaks (EUR/USD, EUR/GBP, DAX)
22:30 USD Core PPI, PPI, PPI ex. Food/Energy/Transport (Aug) (S&P 500, Nasdaq 100, USD/JPY)
00:00 USD Wholesale Inventories, Wholesale Trade Sales (Jul) (S&P 500, Nasdaq 100, USD/JPY)
00:30 USD Crude Oil Inventories, Refinery Crude Runs, Crude Oil Imports, Cushing Inventories, Distillate Fuel Production, Distillates Stocks, Gasoline Production, Heating Oil Stockpiles, Refinery Utilization Rates, Gasoline Inventories (WTI Crude, Brent Crude, USD/CAD)
01:00 USD Thomson Reuters IPSOS PCSI (Sep) (S&P 500, Nasdaq 100, USD/JPY)
03:00 USD 10-Year Note Auction, Atlanta Fed GDPNow (Q3) (S&P 500, Nasdaq 100, USD/JPY)
