USD/JPY extends downside below 142.50 as focus shifts to US Employment data

• USD/JPY drops below 142.50 amid caution due to the US economy's downgrade.
• The job openings pace has already slowed down in the US as the ideology of switching jobs to get a quick hike is changing now.
• After providing more flexibility to the YCC, the BoJ could look for scrapping it as Japan’s industry mood is changing.

The USD/JPY pair stretches downside below the crucial support of 142.50 in the London session. The asset faces significant pressure amid strength in the Japanese Yen as investors hope that the Bank of Japan (BoJ) would leave the support of a dovish interest rate policy sooner.

The US Dollar Index (DXY) consolidates in a narrow range above the crucial support of 102.00 as investors await United States employment data. According to the consensus, the US economy added fresh 189K private payrolls in July, significantly lower than the former release of 497K. Easing employment opportunities would convey a message that a tight labor market is releasing heat and the Federal Reserve (Fed) can consider keeping interest rates steady ahead.

The pace of job openings has already slowed down in the US economy as the ideology of switching jobs to get a quick hike is changing now knowing the fact that the labor cost index is reverting to mean. Overall market mood is quite cautious as emerging economies have come under pressure after Fitch downgrade the credit rating of the US economy to ‘AA ’ from ‘AAA’, citing that fiscal spending will elevate in forward years.

Meanwhile, S&P500 futures generate significant losses in Europe amid bearish market sentiment. The 10-year US Treasury yields have dropped to near 4.02%.

A significant fall in the USD/JPY pair amid consolidating US Dollar indicates strength in the Japanese Yen. Investors believe that after providing more flexibility to the Yield Curve Control (YCC), the Bank of Japan (BoJ) could look for scrapping the YCC as Japan’s industry mood is changing.