USD/JPY Dips to 4-Week Lows, Markets Eye U.S. Nonfarm Payrolls

USD/JPY is showing little movement on Thursday, following two straight winning sessions. Currently, the pair is trading at 103.60. On the release front, today’s key event is Unemployment Claims. Japan will release Average Cash Earnings, with an estimate of 0.5%. On Friday, the US releases three key employment indicators – Nonfarm Employment Change, Average Hourly Earnings and the unemployment rate.

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. On the other hand, Nonfarm Employment Change plunged in August and missed expectations. If that occurs again in the September reading, the dollar could drop and the Fed might get cold feet and decide not to raise rates at the December policy meeting.

The Fed remains pided 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.

Thursday (October 6)

  • 7:30 US Challenger Job Cuts
  • 8:30 US Unemployment Claims. Estimate 255K
  • 10:30 US Natural Gas Storage. Estimate 67B
  • 20:00 Japanese Average Cash Earnings. Estimate 0.5%

Upcoming Key Events

Friday (October 7)

  • 1:00 Japanese Leading Indicators. Estimate 101.7%
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 171K
  • 8:30 US Unemployment Rate. Estimate 4.9%

*All release times are EDT

*Key events are in bold

USD/JPY for Thursday, October 6, 2016

USD/JPY Oct 5 – Oct 7 Chart

USD/JPY October 6 at 10:10 EDT

Open: 103.44 High: 103.74 Low: 103.33 Close: 103.59

USD/JPY Technical

  • USD/JPY was flat in the Asian session. The pair has ticked higher in European trade
  • 104.32 continues to post resistance
  • 103.02 is providing support
  • 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 unchanged on Thursday, consistent with the lack of movement from the pair. Long positions command a majority (60%), indicative of trader bias towards USD/JPY continuing to move higher.

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