USD/JPY – Yen in Holding Pattern Ahead of US Nonfarm Payrolls

USD/JPY is showing little movement on Friday, as the pair is flirting with the 104 line. Currently, the pair is trading at 103.80. On the release front, the spotlight is on US job numbers with the release of three key employment indicators – Nonfarm Employment Change, Average Hourly Earnings and the unemployment rate. In Japan, there are no major events on the schedule. Two minor releases, Average Cash Earnings and Leading Indicators, both missed expectations.

US unemployment claims sparkled last week, dropping to just 249 thousand, beating the estimate of 255 thousand. Unemployment claims have come in below the forecast for 10 straight weeks, pointing to a tight labor market. Jobless filings have been below 300,000 for 83 straight weeks, marking the longest streak since 1970. With a December rate hike up in the air, Friday’s triple-release of US job numbers will be especially important.

The markets are expecting positive news from US payrolls and wage growth reports for September and if the forecasts are accurate, the greenback could push higher. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. These releases could also be an important factor in the Fed’s rate decision in December. If the market predictions are correct and September shows stronger job numbers, the case for a Fed rate hike in December will have improved. If these releases are soft, however, the Fed might get cold feet and a rate hike could remain on hold until 2017.

USD/JPY has been on a roll, as the dollar trades close to 104 yen. Since September 28, when the pair was trading just above the symbolic 100 level, the yen has declined 3.3 percent. This has given the Bank of Japan some breathing room as it tries to coax growth and inflation to higher levels. A weaker yen is beneficial for exports and will make exports more expensive, leading to higher inflation. The bank has adopted radical monetary easing in 2016, including negative interest rates, but the economy has not improved and the yen has surged against the dollar, gaining 16 percent this year. The next BoJ policy meeting takes place at the end of October, and if the bank remains on the sidelines, the yen could reverse directions and recover some recent losses.

Thursday (October 6)

• 20:00 Japanese Average Cash Earnings. Estimate +0.5%. Actual -0.1%

Friday (October 7)

• 1:00 Japanese Leading Indicators. Estimate 101.7%. Actual 101.2%
• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Nonfarm Employment Change. Estimate 171K
• 12:30 US Unemployment Rate. Estimate 4.9%
• 14:00 US Final Wholesale Inventories. Estimate -0.1%
• 14:30 US FOMC Member Stanley Fischer Speaks
• 16:45 US FOMC Member Loretta Mester Speaks
• 19:00 US FOMC Member Esther George Speaks
• 19:00 US Consumer Credit. Estimate 16.8B
• 20:00 US FOMC Member Lael Brainard Speaks

*All release times are EDT

*Key events are in bold

USD/JPY for Friday, October 7, 2016

USD/JPY October 7 at 6:30 EDT

Open: 103.75 High: 103.99 Low: 103.52 Close: 103.76

USD/JPY Technical

• USD/JPY has shown limited movement in the Asian and European sessions
• There is resistance at 104.32
• 103.02 is providing support
• Current range: 103.02 to 104.32

Further levels in both directions:

• Below: 103.02, 102.36, 101.20 and 100.55
•  Above: 104.32, 105.44 and 106.72

OANDA’s Open Positions Ratio

USD/JPY ratio is showing a small majority for long positions (52%), in the Friday session, indicative of slight trader bias towards USD/JPY breaking out and moving higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.