USD/JPY – Japanese yen rally continues as dollar retreats to 113

USD/JPY has recorded considerable losses on Monday, after losing ground in the past two sessions. In North American trade, the pair is trading at 113.15, down 0.50% on the day. There are no U.S releases due to a holiday. Later in the day, Japan releases Current Account, which the surplus expected to rise to JPY 1.52 trillion. On Tuesday, Japan publishes Core Machinery Orders.

The yen has picked up where it left off last week, continuing to gain ground against the greenback. Since Thursday, USD/JPY has declined 1.3%, as the pair trades just above the 113 level. The yen posted slight gains on Friday, after mixed employment data. Nonfarm payrolls dropped sharply to 134 thousand, its smallest gain in a year. This was well short of the estimate of 185 thousand. However, one factor in the disappointing release is Hurricane Florence, which led to many employees being unable to report to work during the storm. Wages appear headed in the right direction – Average Hourly Earnings gained 0.3% in September, and are up 2.9% on a year-to-year basis. The unemployment rate fell to 3.7%, its lowest level since 1969. The mixed numbers put a slight damper on the odds of a December hike, which dipped to 76% after the job releases, down from 80% prior to the releases. A December rate hike would be the fourth this year, with the Fed expected to raise rates another three times in 2019.

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% inflation goal. Some members favor taking steps to ensure that the target is reached, but 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.

Italy and China drag markets lower

USD/JPY Fundamentals

Monday (October 8)

• 19:50 Japanese Core Machinery Orders. Estimate 1.52T

*All release times are DST

*Key events are in bold

USD/JPY for Monday, October 8, 2018

USD/JPY October 8 at 11:10 DST

Open: 113.72 High: 113.94 Low: 113.06 Close: 113.15

USD/JPY Technical

USD/JPY ticked higher in the Asian session. The pair posted slight gains in the European session and this trend has continued in North American trade

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

Further levels in both directions:

• Below: 112.30 and 111.22 and 110
• Above: 113.75, 114.73, 115.51 and 116.87
• Current range: 112.30 to 113.75

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