## USD/JPY Climbs to 157 as US Economic Data Outperforms Expectations

The USD/JPY pair has extended its winning streak to three consecutive days, currently trading near the 157.00 level as the US Dollar gains further traction on the back of better-than-expected American economic indicators. Meanwhile, the Japanese Yen finds itself under mounting pressure from both external headwinds and domestic economic weakness.

### Strong US Employment Data Underpins Dollar Strength

Fresh labor market data from Washington delivered mixed but ultimately positive signals. Initial jobless claims rose to 208,000 for the week ending January 3—slightly lower than the forecasted 210,000—while continuing claims climbed to 1.914 million. However, the four-week moving average for initial applications dropped notably to 211,750 from 219,000, signaling that employment resilience remains intact despite seasonal fluctuations. This steady labor market backdrop has reinforced confidence that the Federal Reserve will hold rates steady, with markets now assigning an 88% probability to an unchanged policy decision at the January 27-28 meeting.

### Trade Deficit Unexpectedly Narrows, Boosting USD

Perhaps more impressive was the sharp contraction in America's trade imbalance. The goods and services trade deficit shrank to $29.4 billion in October—dramatically beating the $58.9 billion estimate and a massive improvement from September's $48.1 billion gap. This represents the tightest trade position since mid-2009, driven by a potent combination of import weakness (hitting a 21-month low) and record-setting exports. The move has provided significant support to USD sentiment and pushed the Dollar Index (DXY) to near 98.80, hovering close to monthly highs.

### JPY Struggles Against Multiple Headwinds

The Japanese Yen's recent weakness reflects a confluence of negative factors. Geopolitical tensions with China have intensified after Beijing imposed export curbs on dual-use goods and opened an anti-dumping investigation into Japanese dichlorosilane—a critical semiconductor material. More pressingly for the currency, Japan's domestic wage growth continues to disappoint. November labor cash earnings expanded just 0.5% year-over-year, sharply underperforming the 2.3% consensus and retreating from October's 2.6% pace. This wage stagnation undermines the case for future Bank of Japan tightening, keeping downward pressure on the Yen.

### What's Next for Currency Markets?

With Friday's US Nonfarm Payrolls report looming, traders are positioned for continued volatility in USD/JPY. The market consensus still pricing in two rate cuts from the Federal Reserve later in the 2025, but employment data will prove crucial in determining whether that outlook holds or requires adjustment. For now, the technical setup favors continued Dollar strength against the Yen.