USD/JPY holds positive ground above 161.00, all eyes on US NFP data

• USD/JPY trades on a stronger note near 161.40 in Friday’s early Asian session. 
• The divergence of monetary policy between Japan and the US continues to undermine the JPY. 
• The rising expectation of Fed rate cuts this year and the fear of FX intervention might cap the pair’s upside. 

The USD/JPY pair remains strong near 161.40 on Friday during the early Asian session. The US Dollar (USD) continues to strengthen to nearly fresh 38-year highs against the Japanese Yen (JPY) amid the wide rate differential between Japan and the US. Later on Friday, traders will closely watch the US June employment data, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. 

The uptick in USD/JPY raises expectations of foreign exchange (FX) intervention from Japanese authorities. “In the interim, USD/JPY will look to UST yields, US Dollar (USD) for directional cues. For USD/JPY to turn lower, that would require the USD to turn/Fed to cut or for BoJ to signal an intent to normalize urgently (rate hike or increase pace of balance sheet reduction). None of the above appears to be taking place,” said OCBC strategists Frances Cheung and Christopher Wong.