USD/JPY – Strong US numbers push Japanese yen to 11-month low

USD/JPY has posted gains in the Wednesday session. In North American trade, the pair is trading at 114.12, up 0.36% on the day. Earlier in the day, the yen dropped to its lowest level since early November 2017. On the release front, there are no Japanese events. In the U.S, ADP nonfarm payrolls jumped 230 thousand, crushing the estimate of 185 thousand. This marked the strongest increase in private sector jobs since March. There was more positive news from the services sector, as ISM Non-Manufacturing PMI climbed to 61.6, above the forecast of 58.0 points. On Thursday, the U.S releases unemployment claims.

Japanese companies have lowered their expectations on inflation, according to a Bank of Japan inflation survey released this week. In July, firms projected inflation of 0.9%, but this has dipped to 0.8%. The BoJ has acknowledged that reaching the target of around 2% has taken longer than expected, and policymakers remain divided on how to deal with the elusive 2% goal. Some members favor taking steps to ensure that the target is reached, while others are concerned about the economic costs of ultra-accommodative policy, such as low bond liquidity in the markets. The BoJ next meets on October 30-31, and it’s a safe bet that the Bank will hold the course, perhaps with some tweaks to monetary policy.

With President Trump basking in the glow of trade deals with Canada and Mexico, the White House is confident that it can seal a deal with a crucial trading partner, Japan. The two economic giants have agreed to commence trade talks, which will keep Japan’s auto sector protected from U.S tariffs, at least for the time being. President Trump has vowed to redress the $69 billion trade surplus that Japan has with the U.S., although Japan has balked at signing a free trade deal with the U.S, as it prefers a multilateral trade agreement.

Euro jumps as Italy revises budget plans

A tempest in a cappuccino cup or mama mia, here we go again?

ADP employment increased by 230,000 in September

USD/JPY Fundamentals

Wednesday (October 3)

• 8:15 ADP Nonfarm Employment Change. Estimate 185K. Actual 230K
• 9:45 US Final Services PMI. Estimate 52.9. Actual 53.5
• 10:00 US ISM Nonfarm Manufacturing PMI. Estimate 58.0. Actual 61.6
• 10:30 US Crude Oil Inventories. Estimate 1.1M
• 14:00 US FOMC Member Lael Brainard Speaks
• 14:15 US FOMC Member Loretta Mester Speaks
• 16:00 US Fed Chair Powell Speaks

Thursday (October 4)

• 8:30 US Unemployment Claims. Estimate 214K

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, October 3, 2018

USD/JPY October 3 at 11:05 DST

Open: 113.68 High: 114.13 Low: 113.52 Close: 114.12

USD/JPY Technical

USD/JPY showed little movement in the Asian session. The pair posted gains in the European session and continues to gain ground in North American trade

• 113.75 is providing support
• 114.73 is the next resistance line

Further levels in both directions:

• Below: 113.75, 112.30 and 111.22
• Above: 114.73, 115.51 and 116.87
• Current range: 113.75 to 114.73

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