USD/JPY – Yen Flat, Markets Eye US Nonfarm Payrolls

USD/JPY is unchanged on Friday, following three straight losing sessions. The pair is trading slightly below the 109 line. In economic news, Japanese Average Cash Earnings was unexpectedly weak, posting a gain of 0.3%. It’s a busy day in the US, with three employment indicators on the schedule – Average Hourly Earnings, Unemployment Rate, and Nonfarm Employment Change. The US will also publish ISM Non-Manufacturing PMI.

Japanese Average Cash Earnings, which measures wage growth, disappointed in the April year-on-year report, posting a weak gain of 0.3%. The markets had expected a  gain of 0.9%. This figure was sharply lower than the March release of 1.4%, and marked a 3-month low. On Tuesday, Capital Spending posted a strong gain of 4.2% in the first quarter, year-on-year. This figure was much stronger than the forecast of 1.9%. The unexpectedly strong reading could lead to a revised Final GDP next week, which could bolster the yen. However, the Japanese economy continues to suffer from weak growth and low inflation. Earlier in the week, Prime Minister Shinzo Abe announced that a sales tax hike would be delayed until October 2019. The sales tax hike had been scheduled to take effect in 2017. The weak economy has not responded to drastic easing moves from the Bank of Japan, and a tax hike could have pushed the economy into recession. The lengthy postponement is a blow to Abe’s economic platform, known as “Abenomics”, which promised to deliver robust, sustainable growth to Japan. This economic platform is based on “three arrows” – fiscal stimulus, monetary easing and structural reforms. Weak global demand and sluggish consumer spending in the first quarter have taken a toll on the struggling economy.

US employment numbers will be in on spotlight again on Friday, highlighted by Nonfarm Employment Change. The forecast for the April report is 159 thousand, almost identical to the previous reading of 160 thousand. There were no surprises on Thursday, as ADP Nonfarm Payrolls came in at 173 thousand, very close to the forecast. Unemployment Claims were almost unchanged at 267 thousand, within expectations. The official upcoming Nonfarm Payrolls report, which is usually a market mover, will carry added importance, as it is the final Nonfarm Payrolls prior to the Fed policy meeting later in the month. Speculation has risen that the Fed will raise rates in next few months. A June rate hike is considered unlikely, but there is a stronger likelihood of a move in July or September.

USD/JPY Fundamentals

Thursday (June 2)

• 20:00 Japanese Average Cash Earnings. Estimate 0.9%. Actual 0.3%

Friday (June 3)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 159K
• 8:30 US Unemployment Rate. Estimate 4.9%
• 8:30 US Trade Balance. Estimate -41.2B
• 9:45 US Final Services PMI. Estimate 51.2
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.4
• 10:00 US Factory Orders. Estimate 1.8%
• 12:30 US FOMC Member Lael Brainard Speaks

*Key events are in bold

*All release times are EDT

USD/JPY for Friday, June 3, 2016

USD/JPY June 3 at 6:35 EDT

Open: 108.86 Low: 108.47  High: 109.14 Close: 108.98

USD/JPY Technical

• USD/JPY has posted losses in the Asian session but has recovered in European trade
• 109.87 is a strong resistance line
• 108.37 is providing support
• Current range: 108.37 to 109.87

Further levels in both directions:

• Below: 108.37, 107.16 and 105.87
•  Above: 109.87, 110.66, 111.30 and 112.26

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing limited movement on Friday. Long positions retain a majority (61%), indicative of trader bias towards USD/JPY breaking out and moving to higher ground.

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.