USD/JPY – Japanese yen jumps to 1-week high

The Japanese yen has posted considerable gains in the Thursday session. In North American trade, the pair is trading at 110.83, down 0.62% on the day. In economic news, unemployment claims dropped to 203 thousand, beating the estimate of 214 thousand. However, ADP Nonfarm Payrolls disappointed with a reading of 163 thousand. This was well below the forecast of 195 thousand. In the services sector, ISM Non-Manufacturing PMI climbed to 58.5, above the estimate of 56.8 points. In Japan, household spending is expected to decline by 0.9%, and Average Cash Earnings is forecast to climb 2.4%. On Friday, the U.S releases three key employment indicators – nonfarm payrolls, wage growth and the unemployment rate.

The U.S economy continues to hum and the labor market remains very tight. Surprisingly, ADP nonfarm payrolls posted a sharp drop in August, falling to 163 thousand. This was the smallest gain since September 2017. Will the official non-farm payrolls follow suit with a soft reading? There was better news from unemployment claims, which dropped to 203 thousand, the lowest number since 1969. However, analysts pointed out that some states had estimated unemployment claims, due to the Labor Day holiday, which may have led to an exaggeration in the decline.

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 support 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%.

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USD/JPY Fundamentals

Thursday (September 6)

• 7:30 US Challenger Job Cuts. Actual 13.7%
• 8:15 US ADP Nonfarm Employment Change. Estimate 195K. Actual 163K
• 8:30 US Unemployment Claims. Estimate 214K. Actual 203K
• 8:30 US Revised Nonfarm Productivity. Estimate 2.9%. Actual 2.9%
• 8:30 US Revised Unit Labor Costs. Estimate -0.9%. Actual -1.0%
• 9:45 US Final Services PMI. Estimate 55.2. Actual 54.8
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.8. Actual 58.5
• 10:00 US FOMC Member John Williams Speaks
• 10:00 US Factory Orders. Estimate -0.5%. Actual -0.8%
• 10:30 US Natural Gas Storage. Estimate 60B
• 11:00 US Crude Oil Inventories. Estimate -2.2M
• 19:30 Japanese Household Spending. Estimate -0.9%
• 20:00 Japanese Average Cash Earnings. Estimate 2.4%

Friday (September 7)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 193K
• 8:30 US Unemployment Rate. Estimate 3.8%

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, September 6, 2018

USD/JPY September 6 at 12:10 DST

Open: 111.52 High: 111.53 Low: 110.84 Close: 110.83

USD/JPY Technical

USD/JPY inched lower in the Asian and European sessions. The pair has posted stronger losses in North American trade

• 110.83 is providing support
• 111.22 has switched to a resistance role following strong losses by USD/JPY on Thursday

Further levels in both directions:

• Below: 110.21 and 109.21 and 108
• Above: 111.22, 112.30, 113.75 and 114.73
• Current range: 110.21 to 111.22

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