USD/JPY – Yen rebounds, investors eye Japanese consumer reports

USD/JPY has posted losses in the Thursday session, after showing strong gains on Wednesday. In North American trade, the pair is trading at 114.02, down 0.45% on the day. On the release front, U.S unemployment claims dropped to 207 thousand, better than the estimate of 214 thousand. Later in the day, Japan releases consumer data. Household Spending is expected to edge lower to 0.0% and Average Cash Earnings is predicted to dip to 1.3%. On Friday, the focus will be on employment data, as the U.S releases wage growth and official nonfarm payrolls.

U.S job numbers continue to look sharp, reflective of a red-hot labor market. Unemployment claims dropped from 214 thousand to 207 thousand. This release comes on the heels of ADP nonfarm payrolls, which jumped 230 thousand in September. This marked the strongest increase in private sector jobs since March. Can the labor market keep up its dizzying pace? We could see some soft numbers as early as Friday, based on markets forecasts. Wage growth is expected to drop from 0.4% to 0.3%, while nonfarm payrolls is forecast to fall from 201 thousand to 185 thousand. Traders should be prepared for some movement in the currency markets during Friday’s North American session.

In Japan, inflation remains well below the Bank of Japan target of close to 2%, and the business sector has lowered its expectations regarding inflation. According to a BoJ survey, companies are projecting inflation at 0.8%, down from 0.9% in July. 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.

USD in the driving seat as yields spike higher

USD/JPY Fundamentals

Thursday (October 4)

• 7:30 US Challenger Job Cuts. Actual 70.9%
• 8:30 US Unemployment Claims. Estimate 214K. Actual 207K
• 9:15 US FOMC Member Randal Quarles Speaks
• 10:00 US Factory Orders 2.2%
• 10:30 US Natural Gas Storage. Estimate 47B
• 19:30 Japanese Household Spending. Estimate 0.0%
• 20:00 Japanese Average Cash Earnings. Estimate 1.3%

Friday (October 5)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change 185K
• 8:30 US Unemployment Rate. Estimate 3.8%

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, October 4, 2018

USD/JPY October 4 at 9:00 DST

Open: 114.53 High: 114.55 Low: 114.03 Close: 114.02

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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