USD/JPY – Dollar Pushes Above 111 on Sparkling ADP Employment Report

The Japanese yen has lost ground in the Wednesday session. In the North American session, USD/JPY is trading at 111.20. On the release front, US ADP Employment Change soared to 263 thousand, crushing the forecast of 184 thousand. The news was less positive in the services sector, as ISM Non-Manufacturing PMI dropped to 55.2, short of the forecast of 57.0 points. Later in the day, the Federal Reserve will release the minutes of its March policy meeting. There are no Japanese events on the schedule. On Thursday, the US releases the weekly unemployment claims report.

The Japanese economy has shown improvement in recent months, as manufacturing and export numbers are pointing higher. At the same time, domestic consumption remains soft and inflation levels remain well below the BoJ’s target of 2.0% percent. The BoJ’s preferred inflation indicator, BoJ Core CPI, remains weak and dipped to 0.1 percent. With such low inflation levels, the Bank of Japan is unlikely to tighten monetary policy anytime soon. The Japanese consumer remains pessimistic about the economy, and Japanese Consumer Confidence is expected to confirm this sentiment, with the March reading standing at 43.5 points.

All eyes are on the Federal Reserve, which will release the minutes of its March policy meeting. At that meeting, the Fed raised rates by a quarter-point, to a range of 0.75%-1.00%. The markets will be paying close attention to the minutes, looking for hints about the timing of the next hike, as well as the tone of the minutes. Both are factors which could move the currency markets on Wednesday. The markets considered the rate statement overly cautious, and this sentiment sent the US dollar broadly lower in March. If the reaction to the minutes is one of disappointment, the dollar could again experience broad losses.

With the US economy continuing to perform well, the discussions around the monetary policy tables are not whether the Fed will raise rates, but how many hikes we will see in 2017. There is speculation about whether the Fed will hike rates two more times or three more times, and Fed policymakers seemed divided on this question. Last week, FOMC member called for three more hikes, saying the Fed should raise rates in June, September and December. Rosengren said that employment and inflation levels were close to the Fed’s targets, and that three additional hikes were needed in order to prevent the US economy from overheating. However, a majority of FOMC members are in favor of two more hikes this year.

Dollar Direction Depends on FOMC and U.S/China Summit

USD/JPY Fundamentals

Wednesday (April 5)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 184K. Actual 263K
  • 9:45 US Final Services PMI. Estimate 53.1. Actual 52.8
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 57.0. Actual 55.2
  • 10:30 US Crude Oil Inventories. Estimate -0.1M
  • 14:00 US FOMC Meeting Minutes

Thursday (April 6)

  • 1:00 Japanese Consumer Confidence. Estimate 43.5
  • 8:30 US Unemployment Claims. Actual 251K

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, April 5, 2017

USD/JPY April 5 at 9:40 EST

Open: 110.84 High: 111.44 Low: 110.53 Close: 111.17

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.54 109.77 110.94 112.57 113.80 114.83

USD/JPY showed little movement in the Asian session. The pair posted gains in the European session and has edged higher in North American trade

  • 110.94 has switched to a support role following gains by USD/JPY in the Wednesday session
  • 112.57 is the next resistance line
  • Current range: 110.94 to 112.57

Further levels in both directions:

  • Below: 110.94, 109.77, 108.54 and 107.49
  •  Above: 112.57, 113.80 and 114.83

OANDA’s Open Positions Ratio

USD/JPY ratio is showing gains in long positions. Currently, long positions have a majority (67%), indicative of trader bias towards USD/JPY continuing to move upwards.

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.