US labour market: USDJPY enters a sideways trend

Following a period of weakness, the JPY has entered a sideways channel amid mixed US economic data. The rate currently stands at 158.36. Find more details in our analysis for 7 October 2026.

USDJPY forecast: key takeaways

• The yield on 30-year US bonds reached its highest level since 2002
• The risk of a Bank of Japan rate hike in October is gradually increasing
• US unemployment rose to 4.2%
• USDJPY forecast for 7 October 2026: 160.25

Fundamental analysis

Fundamental analysis for 7 October 2026 shows that overall investor sentiment is not unequivocally bearish. The interest rate differential between the US and Japan remains significant, so the dollar continues to receive support from carry trades. This factor is allowing the USDJPY pair to hold near 158 even following a weak US employment report. In addition, the US dollar remains relatively strong overall amid high Treasury yields and expectations that the Federal Reserve may deliver another rate hike before the end of the year.

The Bank of Japan is preparing the ground for another rate hike. According to some reports, BoJ officials may confirm at the October meeting that core inflation has approached the 2.0% target. This strengthens expectations of an interest rate hike in December, while rising consumer and wholesale prices, wages, and oil prices further increase the likelihood of additional BoJ monetary policy tightening.

US labour market data came in significantly weaker than expected. Nonfarm Payrolls increased by only 29 thousand in September, below a forecast of around 89 thousand. The previous figure was revised down from 162 thousand to 133 thousand. At the same time, the unemployment rate rose from 4.1% to 4.2%, while the market had expected it to remain at 4.1%.

These figures are a negative factor for the US dollar. The sharp slowdown in job creation and rising unemployment indicate further cooling in the US labour market. This reduces the need for additional Fed monetary policy tightening and could strengthen expectations of a more dovish stance from the regulator going forward.

The USDJPY forecast for 7 October takes into account that the interest rate differential between the US and Japan remains significant and continues to support demand for the dollar against the yen. As long as US bond yields remain high, carry trades may also limit the potential for the Japanese currency to strengthen.

Technical outlook

On the H4 chart, the USDJPY pair formed a resistance level at 158.45 and a support level at 156.65. On the D1 timeframe, support is located at 155.30, with resistance at 159.00. The overall trend remains bullish, but growth may continue from the sideways channel, with the first upside target at 160.25.

At the same time, the USDJPY forecast also takes into account another possible scenario. The USDJPY rate may form a corrective wave and move towards 156.65 before resuming the uptrend.

USDJPY overview

• Asset: USDJPY
• Timeframe: H4 (Intraday)
• Trend: bullish
• Key resistance levels: 158.45 and 159.00
• Key support levels: 156.65 and 155.30

USDJPY trading scenario for today

Trading scenario (Buy Stop)

A consolidation above the 158.45 resistance level would confirm increasing buying pressure and create conditions for opening long positions.

• Current price: 158.36
• Entry level: 158.55
• Take profit: 160.25
• Stop loss: 158.15
• Risk-to-reward ratio: more than 1:4

The trade idea is valid until 8:00 AM on 8 October 2026 (server time, UTC+3).

Risk factors

Potential changes in expectations regarding Federal Reserve and Bank of Japan policies remain key risk factors for the USDJPY pair. More hawkish Fed rhetoric, accelerating inflation, or a recovery in the US labour market could push US bond yields higher and support the dollar, limiting the pair’s decline. An additional upside factor for the USDJPY rate could be a cautious stance from the Bank of Japan or weak economic data from Japan.

Summary

Weak US labour market data has increased pressure on the dollar and raised the likelihood of a USDJPY correction. At the same time, the uptrend remains technically intact for now, so a breakout below the nearest support levels would be the key signal for a further decline. In the medium term, the balance of risks is gradually shifting in favour of a stronger yen amid potential Fed policy easing and further normalisation of Bank of Japan policy. At the same time, USDJPY technical analysis suggests a rise towards 160.25.

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