Non-farm payroll came in much stronger than expected, but wage growth and unemployment rate disappointed.  Where will USD/JPY be heading?

Non-farm payroll printed 227K, outperformed expectation by more than 50K. However, unemployment rate and wage growth missed their mark, came in at 4.8% (versus forecast 4.7%) and 0.1% (versus forecast 0.3%) respectively. The data were overshadowed by recent Trump’s policies and comments against the strength of the dollar. Fed kept their interest rate unchanged as expected, but their statement appeared less hawkish.  We believe USD/JPY will be in a dilemma this week and here are the reasons why :

Bearish for USD/JPY

  • Trump is not in favour of the dollar being too strong.
  • Market is scaling back expectation from 3 rate hikes to 2 rate hikes in 2017.

Bullish for USD/JPY

  • Bank of Japan (BOJ) announced plans to buy an unlimited amount of Japanese Government Bonds (JGBs).

BOJ Retaliates

BOJ maintained their interest rate at -0.1%.  What’s worth taking note of are their plans to purchase an unlimited amount of 5-10 year JGBs, hoping to hit their inflation target as soon as possible.  We see this as a form of retaliation to Trump’s policies and comments, which had caused the USD/JPY to fall more than 600 pips since the start of 2017.  Like it or not, every country will put their interest in the number one spot.  At this moment, we think BOJ is likely to maintain some balance.  On one hand, prevent the yen from strengthening too much, jeopardising their exports and plans to hit inflation target.  On the other hand, avoid excessive interventions to weaken their currency and agitating their number one trading partner (in terms of exports), the US.

BOE Cautious

Bank of England (BOE) expressed cautious outlook in their official statement.  Even though they upgraded their GDP outlook from 1.4% to 2%, but their dovish bias shown unwillingness to tighten.  This switch from their hawkish bias in December sent the sterling lower.  The main challenge faced by BOE is the uncertainties from Trump’s policies, Brexit plans and their impact on UK’s economy.  With only the manufacturing production scheduled to release this week, we expect the sterling to remain weak.

Our Picks

GBP/USD – Slightly Bearish.  The bearish momentum is likely to continue towards the support around 1.2420.  Lack of economic data should provide support around 1.2420.

NZD/USD – Slightly Bearish.  We expect RBNZ to remain dovish in their statement this week.  The resistance around 0.7330 is likely to hold.

XAU/USD (Gold) – Possible buy at dips.  Price is near key resistance around 1224, but the bull should still dominate.  Consider buying at dips.

Top News This Week (GMT+8 time zone)

Australia: Cash Rate.  Tuesday 7th February, 11.30am.

We expect figures to remain unchanged at 1.5% (previous figure was 1.5%).

New Zealand: Offiicial Cash Rate.  Thursday 9th February, 4am.

We expect figures to remain unchanged at 1.75% (previous figure was 1.75%).

UK: Manufacturing Production m/m.  Friday 10th February, 5.30pm.

We expect figures to come in at 0.4% (previous figure was 1.3%).

Fullerton Markets Research Team

Your Committed Trading Partner

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD extends recovery toward 0.6800 in Asian trading on Thursday, despite mixed Australian employment data. The Aussie cheers a return of risk appetite, which weighs on the post-Fed US Dollar recovery. All eyes now remain on US economic data for fresh impetus. 

AUD/USD News
USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD/JPY is attacking 143.00 in Thursday's Asian session, reversing sharply from 144.00. The pair pares back gains in tandem with the US Dollar, as the latter's post-Fed recovery falters due to a rebound in risk sentiment. The focus is next on the US data due later today and Friday's BoJ decision. 

USD/JPY News
Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price attracts some dip-buying during the Asian session on Thursday and seems to have stalled its retracement slide from the $2,600 mark, or a fresh all-time peak touched the previous day. The US dollar trims a part of its intraday gains to a one-week high, which turns out to be a key factor lending support to the commodity.

Gold News
Bitcoin surges to $62,000 mark after 50 bps Fed rate cut

Bitcoin surges to $62,000 mark after 50 bps Fed rate cut

Bitcoin and Ripple eye for a rally as they break and find support around their resistance barrier. Meanwhile, Ethereum demonstrates signs of recovery as it approaches a critical resistance level, indicating that an upward rally could be on the horizon if it successfully breaks through.

Read more
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures