USD/JPY’s bounces up from 111.50 to reach fresh YTD highs above 112.00

• The dollar resumes its uptrend to hit fresh multi-month highs at 112.20.
• The USD, unfaced by the weak US employment report.
• USD/JPY: Seen appreciating to 113.00 by end 2022.

The greenback has retraced the previous decline towards session lows at 111.00 seen earlier on Friday, to breach previous year-to-date highs at 112.05 and attack February 2020 high at 112.20.

The weak NFP does not dent USD/JPY’s strength

The dollar has shrugged off the negative impact caused by the weaker than expected US employment report and has resumed its bullish trend. The pair has bounced up after a brief hesitation and is on track to close its best weekly performance in the last six months.

US employment increased less than expected in September, with 194,000 new jobs instead of the nearly 500,000 forecasted by market analysts. These figures weighed on the US dollar for some time although the greenback’s fundamental support remains intact. September's weak job creation is unlikely to deter the Federal Reserve to announce the beginning of bonds tapering, which is one of the main drivers of the recent USD rally.

USD/JPY: Seen at 113.00 by the end of 2022 – Westpac

From a broader perspective, the FX Analysis team at Westpac expect the pair to continue appreciating over the next years: “The BoJ will have no alternative but to continue its extraordinary measures at full stretch for the foreseeable future, in the hope of moving towards 2.0%yr inflation, while the rest of the world normalizes (…) USD/JPY is therefore seen at 112 end-2021; 113 end-2022; and 116 end-2023.” 

Technical levels to watch