USD/JPY – Yen Dips on Strong US Payrolls Report

The US dollar has strengthened on Wednesday, as USD/JPY trades at 123.30 in the North American session. In economic news, In the US, the ADP Nonfarm Payrolls easily beat expectations, posting a gain of 217 thousand. There are no Japanese releases on Wednesday. We could see further movement from the pair on Thursday, as the US releases Unemployment Claims and the ISM Non-Manufacturing PMI. As well, Federal Reserve head Janet Yellen will testify before the Joint Economic Committee in Washington.

The Japanese economy has been hurt by weak domestic demand, so a strong Retail Sales report in October was excellent news. Still, the yen failed to take advantage as USD/JPY trades at two-week highs. Meanwhile, the Bank of Japan is holding the course with its monetary policy, as the central bank continues its asset-purchase program of about $60 billion per year. With inflation well short of the 2 percent target, the BOJ will remain under pressure to add monetary stimulus, even though such a move will likely hurt the wobbly Japanese yen.

In the US, this week’s employment numbers kicked off in style, with a strong surge from ADP Nonfarm Payrolls. The key indicator climbed to 217 thousand, easily beating the estimate of 191 thousand. This marked a sharp rebound from the previous release of 182 thousand. On Thursday, we’ll get a look at Unemployment Claims, followed by the official NFP on Friday. With the markets abuzz over continuing speculation about a rate hike later in the month, these employment releases will be under the market microscope and could result in volatility on the currency markets.

US manufacturing data has been anything but impressive in recent readings, and this was underlined by a soft reading from ISM Manufacturing PMI on Tuesday. The key index slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction from the index since May 2013. Manufacturing data in October was also soft – the Empire State Manufacturing Index posted a dismal reading of -10.7 points, worse than the estimate of -5.3 points. This marked a fourth straight decline by the important indicator. As well, Philly Fed Manufacturing Index posted a weak gain of 1.9 points. This negative trend points to trouble in the manufacturing sector and could weigh on the US dollar.

USD/JPY Fundamentals

Wednesday (Dec. 2)

• 1:00 US FOMC Member Lael Brainard Speaks
• 13:10 US FOMC Member Dennis Lockhart Speaks
• 13:15 ADP Nonfarm Employment Change. Estimate 191K. Actual 217K
• 13:30 US Fed Chair Janet Yellen Speaks
• 13:30 US Revised Nonfarm Productivity. Estimate 2.2%. Actual 2.2%
• 13:30 US Revised Unit Labor Costs. Estimate 1.1%. Actual 1.8%
• 15:30 US Crude Oil Inventories. Estimate -0.6M
• 17:25 US Fed Chair Janet Yellen Speaks
• 19:00 US Beige Book
• 20:40 US FOMC Member John Williams Speaks

Upcoming Key Events

Thursday (Dec. 3)

• 13:30 US Unemployment Claims. Estimate 269K
• 15:00 Fed Chair Janet Yellen Testifies
• 15:00 ISM Non-Manufacturing PMI. Estimate 58.1 points

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Wednesday, December 2, 2015

USD/JPY December 2 at 15:30 GMT

USD/JPY 123.37 H: 123.41 L: 122.82

USD/JPY Technical

• USD/JPY posted slight gains in the Asian session, and leveled off in the European session. The pair has resumed posting gains in the North American session.
• 123.74 is an immediate resistance line.
• 122.40 has strengthened in support as the pair trades at higher levels.
• Current range: 122.40 to 123.74

Further levels in both directions:

• Below: 122.40, 121.50, 120.40 and 118.53
• Above: 123.74, 125.63 and 126.84

OANDA’s Open Positions Ratio

USD/JPY ratio continues to show a solid majority of in favor of long positions (60:40), which is indicative of strong trader bias towards the pair continuing to move 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.