USD/JPY – Yen Soars After Weak US Services Report

USD/JPY is unchanged on Wednesday, after sharp losses in the Tuesday session. Currently, USD/JPY is trading at 101.60. On the release front, today’s highlight is JOLTS Job Openings. The markets are expecting a slight downturn in August, with an estimate of 5.58 million. Later in the day, Japan will release Final GDP. The economy is expected to show no growth in the second quarter, with an estimate of 0.0%. On Thursday, the US will release Unemployment Claims.

Recent US numbers have been pointing downwards and this has lowered market expectations over a September rate hike. On Tuesday, the ISM Non-Manufacturing PMI, a key gauge of the services sector, fell to 51.4 points, its weakest reading since August 2010. The Japanese yen took full advantage of the dismal reading, jumping close to 200 points, its strongest daily gain since July 29.

The robust US labor market hit a bump in August, as US employment numbers were dismal on Friday. Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier. This was well short of the forecast of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings edged lower to 0.1%, shy of the forecast of 0.2%. The CME FedWatch Tool is showing a substantial drop in the odds of a rate hike for both September and December – the likelihood of a September rise is at 19%, while the odds of a December hike are down to 39%. Even though the US labor market remains close to full capacity, many FOMC members remain uneasy about a rate hike, especially given the persistent lack of inflation in the economy. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. These releases could play a critical role in determining if the Fed presses the rate trigger this month, or decides to revisit the rate question in December, exactly a year from the last rate hike.

USD/JPY Fundamentals

Wednesday (September 7)

• 1:00 Japanese Leading Indicators. Estimate 98.6%. Actual 100.0%
• 10:00 US FOMC Member Esther George Speaks
• 10:00 US JOLTS Jobs Openings. Actual 5.58M
• 10:00 US Beige Book
• 19:50 Japanese Current Account. Estimate 1.59T
• 19:50 Japanese Final GDP. Estimate 0.0%
• 19:50 Japanese Bank Lending
• 19:50 Japanese Final GDP Price Index. Estimate 0.8%

Thursday (September 8)

• 8:30 US Unemployment Claims. Estimate 264K

*All release times are EDT

*Key events are in bold

USD/JPY for Wednesday, September 7, 2016

USD/JPY September 7 at 10:30 EDT

Open: 101.58 High: 101.70 Low: 101.19 Close: 101.57

USD/JPY Technical

• USD/JPY posted slight losses in Asian trade but has recovered in the European session
• 101.20 is under pressure in support
• There is resistance at 102.36
• Current range: 101.20 to 102.36

Further levels in both directions:

• Below: 101.20, 99.71 and 98.95
•  Above: 102.36, 103.73, 104.99 and 106.38

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight gains in long positions. Currently, long positions have a majority (62%), 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.