USD/JPY – Japanese yen drops to 1-week low as emerging markets sell-off boosts US dollar

The Japanese yen has edged lower in the Wednesday session. In North American trade, the pair is trading at 111.60, up 0.14% on the day. In economic news, the U.S trade deficit continued to widen in July, with a reading of -$50.1 billion. This marked the highest deficit in 5 months. On Thursday, the U.S releases ADP nonfarm payrolls, unemployment claims and the ISM Non-Manufacturing PMI. Japan will release Household Spending and Average Cash Earnings.

The U.S manufacturing sector is in excellent shape, according to a key indicator. In August, the ISM Manufacturing PMI survey climbed to 61.3, up from 58.1 a month earlier. This marked the indicator’s highest level since February 2011. The survey found that strong business conditions had created a stronger demand for manufactured goods. However, many manufacturers are concerned with tariffs and how long they will last, which has led to uncertainty in the pricing of goods. The strong manufacturing data supports the case for higher interest rates in the United States. The odds of further rate hikes in 2018 have risen this week – according to the CME Group, the likelihood of a rate hike in September is 99% and an increase in December stands at 66%.

Emerging markets continue to struggle, as nations such as Argentina and Indonesia are experiencing major declines in their currencies against the U.S dollar. This has triggered heavy losses in emerging equity markets, and fears that this could hamper global growth are weighing on European and North American markets as well. If the sell-off in the emerging markets continue to spiral downwards, the U.S dollar could gain more ground.

Aussie jumps as growth quickens in second quarter

I’m interested but not worried, oddly enough

USD/JPY Fundamentals

Wednesday (September 5)

• 8:30 US Trade Balance. Estimate -50.2B. Actual -50.1B

Thursday (September 6)

• 8:15 US ADP Nonfarm Employment Change. Estimate 195K
• 8:30 US Unemployment Claims. Estimate 214K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.8
• 19:30 Japanese Household Spending. Estimate -0.9%
• 20:00 Japanese Average Cash Earnings. Estimate 2.4%

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, September 5, 2018

USD/JPY September 5 at 11:00 DST

Open: 111.43 High: 111.72 Low: 111.37 Close: 111.60

USD/JPY Technical

In the Asian session, USD/JPY posted small gains but then retracted. The pair ticked lower in European trade before recovering. The pair has posted small gains in the North American session

• 111.22 is providing support
• 112.30 is the next resistance line

Further levels in both directions:

• Below: 111.22, 110.21 and 109.21
• Above: 112.30, 113.75 and 114.73
• Current range: 111.22 to 112.30

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