Today’s Market Outlook
Quiet Trading Ahead of Tomorrow’s US Jobs Report
■ Market Overview
The FX market is generally calm today.
Following last week’s coordinated US-Japan intervention, USD/JPY underwent a substantial adjustment toward yen strength, falling from the 163 range into the 155 range.
Although it recovered into the 157 range at the start of the week, it has not shown enough momentum to move clearly above 158.
Coming immediately after a sharp strengthening of the yen, speculative yen selling has been restrained in the market.
Meanwhile, the US employment report is due tomorrow.
With a major event approaching, traders are unlikely to take large directional positions today, leaving the market in a quiet, wait-and-see mode.
■ USD/JPY
USD/JPY rose to around 157.89 during the London morning session and is currently trading near 157.85.
The pair remains firm in the upper 157 range but has not managed to move above 158.
Yen-selling pressure remains supported by the US-Japan interest-rate differential and higher equity markets.
However, the effects of last week’s coordinated US-Japan intervention are still being felt, and concerns about further intervention are likely to intensify near 158.
As a result, yen-selling demand supports the downside, while intervention concerns limit the upside.
Until tomorrow’s US employment report, USD/JPY is likely to remain range-bound around the 157 level.
■ Impact of Coordinated US-Japan Intervention
Last week’s coordinated US-Japan intervention caused USD/JPY to fall sharply from the 163 range to the 155 range in a short period of time.
Although the pair has since seen buying back, market participants are finding it more difficult than before to aggressively initiate dollar-buying and yen-selling positions.
In particular, if yen weakness accelerates from the 158 range, concerns about rate checks or further intervention by US and Japanese authorities are likely to grow.
The clear coordinated stance shown by the two authorities has increased the political risk of yen-selling trades.
At the same time, as long as actual intervention does not take place, USD/JPY is likely to remain supported on the downside by the US-Japan interest-rate differential and yen carry trades.
The main focus for now is whether the 157 range becomes established as the new short-term equilibrium level after the intervention.
■ The Dollar
The dollar index is trading in positive territory today.
After recent dollar weakness, the dollar is seeing a modest corrective rebound ahead of tomorrow’s US employment report.
EUR/USD has fallen to around 1.1537 and remains near its lows around 1.1540.
The gradual rise in the US 10-year Treasury yield toward 4.63% is also supporting the dollar.
However, broad-based aggressive dollar buying has not emerged.
The move appears limited to position adjustment ahead of the employment report, and the dollar’s more decisive direction will depend on tomorrow’s results.
■ Middle East Developments
Expectations are growing for the reopening of the Strait of Hormuz.
Talks between Iran and Oman are making progress, raising hopes for measures to ensure the safety of maritime transport.
Although the United States is not directly participating in the talks, President Trump has indicated a wait-and-see stance for now, saying that reaching an agreement would be preferable.
As geopolitical risks ease, NY crude oil futures have fallen into the 75-dollar range.
Lower oil prices are easing concerns about a renewed rise in global inflation and contributing to broader financial-market stability.
However, direct talks between the United States and Iran have not resumed, and the risk of renewed deterioration in the situation remains.
■ Oil Market
NY crude oil futures are consolidating in the 75-dollar range.
Expectations of a reopening of the Strait of Hormuz and easing tensions in the Middle East are capping the upside in oil prices.
Lower oil prices reduce Japan’s import costs and ease concerns about deteriorating terms of trade, which would normally support the yen.
At the same time, easing global inflation concerns could reduce expectations for further rate hikes by central banks around the world.
At present, improved risk appetite from lower oil prices is encouraging yen selling, while expectations of improved terms of trade are supporting the yen. As a result, the overall impact on the FX market remains limited.
■ Equity Markets
Risk appetite continues to support equity markets.
US equities, including the Dow Jones and S&P 500, have been reaching record highs day after day.
Some AI-related stocks are seeing corrective selling due to overbought conditions, but buying remains dominant across the broader equity market.
In addition to lower oil prices, gold prices have also recovered, creating a relatively stable investment environment across financial markets.
Higher equity prices support yen carry trades and tend to underpin USD/JPY.
However, with tomorrow’s US employment report approaching, equity markets may also show caution toward chasing prices higher.
■ Tomorrow’s US Employment Report
Market attention is focused on tomorrow’s US employment report.
The key components are:
・Nonfarm payrolls
・Unemployment rate
・Average hourly earnings
・Revisions to the previous month’s employment figures
If payrolls and average hourly earnings are strong, the resilience of the US economy and inflationary pressure may be reaffirmed, potentially leading to higher US yields and dollar buying.
In that case, USD/JPY could test the 158 range, although concerns about further intervention would likely intensify at the same time.
Conversely, if the employment report is weak, expectations for tighter US monetary policy may fade, and USD/JPY could fall below 157 and test the 156 range.
■ Today’s Key Economic Data
The main upcoming economic releases are as follows:
・Swiss employment data
・UK Construction PMI
・Euro area retail sales
・US Challenger Job Cuts
・US preliminary nonfarm productivity data
・US initial jobless claims
・US final wholesale inventories
・Czech National Bank policy-rate decision
・Bank of Mexico policy-rate decision
US initial jobless claims will provide an additional indication of labor-market conditions ahead of tomorrow’s employment report.
However, today’s data are unlikely to determine the market’s broader direction, with markets expected to remain focused on tomorrow’s employment report.
■ Speaking Events
Scheduled events include the release of the ECB Economic Bulletin and participation by St. Louis Fed President Musalem in a panel discussion.
Markets will watch Musalem’s comments for his assessment of the US labor market and inflation.
However, with the US employment report due tomorrow, the reaction to his remarks may be limited.
The expiration of the lock-up period for SpaceX is also scheduled in the US equity market.
If concerns about worsening supply and demand destabilize related or technology stocks, broader equity-market risk sentiment could also be affected.
■ Key Focuses for the London and New York Sessions
① Whether USD/JPY moves above 158
② Whether intervention concerns limit the upside near 158
③ Whether the 157 range becomes established as the short-term equilibrium level
④ The result of US initial jobless claims
⑤ Whether the US 10-year Treasury yield rises above 4.63%
⑥ Whether EUR/USD can hold in the low-1.15 range
⑦ Whether US equities continue to reach record highs
⑧ Whether Middle East developments and oil prices remain stable
■ Summary
The FX market is showing little momentum today as traders wait for tomorrow’s US employment report.
USD/JPY plunged from the 163 range into the 155 range following last week’s coordinated US-Japan intervention before recovering into the 157 range.
The pair is currently holding firm in the upper 157 range, but concerns about further intervention remain strong near 158, limiting aggressive upside buying.
Expectations of a reopening of the Strait of Hormuz are growing, and oil prices have fallen into the 75-dollar range.
US equities continue to reach record highs, leaving the overall risk environment constructive.
However, caution following the coordinated intervention and a wait-and-see stance ahead of tomorrow’s US employment report are both strong. USD/JPY is therefore likely to remain centered around the 157 range for the time being.
From here, markets are likely to monitor US initial jobless claims, US yields, equity markets, and Middle East developments while assessing position adjustments ahead of tomorrow’s US employment report.
