USD/JPY pair dropping before US Non-Farm Payrolls

The dollar is under slight pressure in limited market conditions, with most markets closed due to Good Friday. The USD/JPY is trading around 110.40, undermined by the poor performance of US Treasury yields on Thursday. 

Psychological support for the pair now lies at 110. Breaking it would generate a stronger reversal signal and sideline larger bulls for a deeper correction.

In the US, it is a semi-holiday as banks will be open, but exchange markets will be closed. The bond market will open, but an early closing is expected.

Besides, the United States will publish the Non-farm Payroll report. The country is expected to have added 647,000 new jobs in March. Meanwhile, the unemployment rate is forecast at 6%, down from the previous month’s 6.2%. Average hourly earnings are increasing by 0.2%. The report may spur some interesting moves given the limited volumes.

The United States is on an accelerated recovery path amid a robust vaccination campaign, state reopens, two rounds of stimulus checks, and optimism about a new infrastructure package. While this latest development may take time to unfold, the American industry is already up and running.

GBP/USD has advanced amid better market sentiment

Once the US NFP non-farm payrolls are released, the volatility will increase. Ahead of the release, the dollar has been on the defensive. While the NFP may boost the dollar, the British pound is well positioned to weather the storm. Unlike the United States, infections are declining in Britain. That may allow the GBP/USD pair to rally if the figures do not meet expectations. The technical charts also show a picture of improvement for the pound.

Investors’ attention focused on Non-Farm Payrolls 

En route to this all-important NFP release, Treasury yields remain leading USD price action and fell after President Joe Biden will present his massive $2.25 trillion infrastructure spending plan. Why? 

First, the financing of this expenditure is expected to come from tax increases, which will reduce the need for more debt issuance. With fewer bonds outstanding, they are worth more, and the result is lower yields and, therefore, a weaker dollar. Second, Republicans oppose the program, and Congress can substantially modify Biden’s plan.

That dynamic may change if the prospects for a solid recovery raise inflation expectations and force the Fed to act sooner and against its current commitment. The next adjustment in the markets depends on the NFP.