Uptrend supports USDJPY purchases with a target at 161.90

The USDJPY pair is showing a decline on Thursday after the publication of Japanese wage data. In November, base wages rose by 2.7%, becoming the highest since 1992. The country's inflation accelerated to 3.4% in November from 2.6% in October.

Nevertheless, skepticism about the timing of the Bank of Japan's rate hike remains. According to many investors, the changes may be postponed until March due to uncertainty associated with the possible protectionist policy of U.S. President-elect Donald Trump.

Against this backdrop, the U.S. dollar is facing pressure due to profit taking on Treasury bond yields. The minutes of the Federal Reserve (Fed) meeting on December 17–18 indicate an intention to slow the pace of rate cuts amid persistent inflation. As noted by Fed Governor Christopher Waller, inflation should continue to slow, creating conditions for further easing of monetary policy.

The key driver for the USDJPY pair will be Friday's U.S. jobs report (NFP). According to the ADP data released earlier, the private sector employment growth amounted to 122 thousand in December, which is lower than the forecast of 140 thousand. At the same time, the number of jobless claims in the U.S. fell to 201 thousand, hitting an 11-month low. This is a sign of stability in the labor market.

From a technical point of view, USDJPY keeps an upward trend on the D1 timeframe. According to the wave analysis, the price is forming the third upward wave on the H8 timeframe. The breakdown of the top of the first wave at 156.70 has already occurred, reinforcing the signal for further growth.

Signal:

The short-term outlook for the USDJPY pair is to buy.

The target is at the level of 161.90.

Part of the profit should be fixed near the level of 160.00.

The Stop loss could be placed at the level of 156.00. 

The bullish trend is of a short-term nature, so it’s suggested to limit the trading volume to no more than 2% of your capital.