USD/JPY – Yen Struggling at 103, ADP Employment Report Disappoints

USD/JPY has edged higher on Wednesday, following strong gains in the Tuesday session. Early in North American trade, the pair is trading slightly above the 103 line. On the release front, Japanese Consumer Confidence improved to 43.0 points, within expectations. In the US, ADP Employment Change slipped to 154 thousand, short of the forecast of 166 thousand.  Later in the day, we’ll get a look at the ISM Non-Manufacturing PMI. On Thursday, the US will release Unemployment Claims, with the estimate standing at 255 thousand.

US employment numbers will be in the spotlight over the next few days. The ADP payroll report was a disappointment, dropping to 154 thousand, its lowest gain since February 2014. With the odds of a December rate hike priced in at about 55%, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the US dollar could pick up some ground against the yen.

The Fed remains divided over the timing of a rate hike, and this was underscored at the September meeting, when three of the ten FOMC members voted against the decision to hold rates at 0.25%, voting instead in favor of an immediate rate hike. On Tuesday, FOMC member Jeffrey Lacker, one of seven non-voting members, said that he would have voted in favor of a rate hike at the last meeting had he been able to vote. The strong dissent in the September rate decision has not helped the credibility of the Fed, which had promised a series of rate hikes in 2016, but has opted for the sidelines since its quarter-point hike last December. Continuing mixed messages from the Fed make it difficult for the markets to ascertain what the Fed has planned regarding monetary policy and whether it will press the rate trigger in December or wait until next year.

Tuesday (October 4)

• 1:00 Japanese Consumer Confidence. Estimate 41.8. Actual 43.0

Wednesday (October 5)

• 8:15 US ADP Nonfarm Employment Change. Estimate 166K. Actual 154K
• 8:30 US Trade Balance. Estimate -41.1B
• 9:45 US Final Services PMI. Estimate 51.9
• 10:00 US ISM Non-Manufacturing PMI. Estimate 53.1
• 10:00 US Factory Orders. Estimate -0.4%
• 10:30 US Crude Oil Inventories. Estimate 1.1M

Upcoming Key Events 

Thursday (October 6)

• 8:30 US Unemployment Claims. Estimate 255K

*All release times are EDT

*Key events are in bold

USD/JPY for Wednesday, October 5, 2016

USD/JPY October 5 at 9:05 EDT

Open: 102.86 High: 103.17 Low: 102.67 Close: 103.08

USD/JPY Technical

• USD/JPY was flat in the Asian session. The pair posted slight gains in European trade and is choppy early in North American trade
• 104.32 is a strong resistance line
• 103.02 was tested earlier in support and could see further action in the North American session
• Current range: 103.02 to 104.32

Further levels in both directions:

• Below: 103.02, 102.36, 101.20 and 100.55
•  Above: 104.32, 105.44 and 106.72

OANDA’s Open Positions Ratio

USD/JPY ratio is showing long positions with a majority (60%), indicative of trader bias towards USD/JPY 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.