USD/JPY – Yen Ticks Lower as Markets Eye Nonfarm Payrolls

USD/JPY has edged higher in the Friday session, crossing above the 113 level. Currently, the pair is trading at 113.16. On the release front, the Bank of Japan released the minutes of its December meeting. In the US, the focus is on employment numbers, led by Nonfarm Payrolls. The indicator is expected to jump to 170 thousand. At the same time, wage growth is forecast to edge down to 0.3%. Any unexpected readings from either of these key indicators could lead to volatility in the North American session.

There were no surprises from the Federal Reserve, but the markets still came away disappointed, which put pressure on the dollar. As expected, the Fed opted to maintain the benchmark interest rate at 0.50%. The markets were hoping for some hints about monetary policy from the rate statement, but the statement was more dovish than investors would have liked. The statement reiterated that the US economy is in good shape and that inflation continues to move towards the Fed’s target of 2 percent. Analysts expect the Fed to raise rates two or three times in 2017, with the odds of a rate hike by June priced in at 70%. However, the post-election euphoria which sent the markets higher appears to have dissipated, as Trump’s economic policy remains unclear, while his rhetoric remains controversial and undiplomatic. Trump has promised substantial fiscal spending and tax cuts, but hasn’t provided any details. Just a few months ago, a red-hot US economy had led to the Fed loudly hinting at gradual rate increases in 2017. However, with the markets showing increasing uneasiness about the new Trump administration, the Fed will likely change gears and adopt a wait-and-see attitude in the coming months, watching what bills Trump is able to get through Congress and how the economy responds.

U.S Payrolls Increase +227,000, Wage Growth Weakens

Just two weeks into his presidency, President Donald Trump has not hesitated to butt heads with foreign leaders. Earlier this week it was the turn of Japan, as Trump accused Japan of currency devaluation in order to gain an unfair trade advantage from a weaker yen. Japan flatly denied the claim of currency manipulation, saying that Japan’s monetary policy was aimed at curbing deflation and not lowering the value of the yen. Trump and Japanese Prime Minister Shinzo Abe will meet in Washington on February 10, and it’s a sure thing that currency policy will be high up the list on the agenda of the meeting. The BoJ sent off its own warning about currency manipulation when the dollar pushed above the 120 level, but BoJ Governor Haruhiko Kurodo recently stated that the bank does not have a target for the currency. It’s a safe bet that we haven’t seen the last of the war of words between the US and Japan with regard to currency policy.

USD/JPY Fundamentals

Thursday (February 2)

• 18:50 BoJ Monetary Minutes

Friday (February 3)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 170K
• 8:30 US Unemployment Rate. Estimate 4.7%
• 9:15 US FOMC Member Charles Evans Speaks
• 9:45 US Final Services PMI. Estimate 55.1
• 10:00 US ISM Nonfarm Manufacturing PMI. Estimate 57.0
• 10:00 US Factory Orders. Estimate 1.5%

*All release times are GMT

*Key events are in bold

USD/JPY for Friday, February 3, 2017

USD/JPY February 3 at 7:00 EST

Open: 112.81 High: 113.25 Low: 112.48 Close: 113.16

USD/JPY Technical

USD/JPY was choppy in the Asian session. The pair has inched higher in European trade

• 112.57 is providing support
• 113.80 is the next resistance line
• Current range: 112.57 to 113.80

Further levels in both directions:

• Below: 112.57, 110.94, 109.85 and 108.61
•  Above: 113.80, 114.83 and 115.90

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight gains in long positions. Currently, long positions have a majority (56%), 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.