USD/JPY: A very busy week ahead to bring pair to life

USD/JPY is a touch lower in the open this week despite a risk-on session into the close. USD/JPY is currently trading at 106.79 and is lower by -0.10% having traded between 106.79 and 106.63.

The US Dollar was unable to attract demand on Friday although the DXY did hold above the 21-day moving average and has not extended beyond the mid-week low. Stocks, on the other hand, did make a stronger performance with the Dow Jones Industrial Average, DJIA, added 372.68 points, or 1.42%, to 26,573.72 while the S&P 500 index put on 41.38 points or 1.42% to 2,952.01. The Nasdaq Composite climbed 110.21 points, or 1.4%, to 7,982.47.

Disappointing US employment data did not impact so much, especially on rates; The front-end US Treasuries were little changed as a 2.5bp rally in 30s helped to flatten the curve. However, the jobs report certainly left the door open for a rate cut, potentially as soon as this month's interest rate decision meeting. 

"The September US jobs report shows payrolls growth of 136,000, which was a touch weaker than the 145,000 consensus. It reinforces the message that jobs growth is slowing and with wages also undershooting expectations – growth of 2.9% year-on-year versus expectations of 3.2% - the fundamentals underpinning consumer spending may not be as strong as we had believed,"

analysts at ING Bank explained. 

Eyes on the Fed and CPI

The key for the week ahead will be trade talks and the US Consumer Price Index as well as the Federal Open Market Committee's minutes of the prior Fed' interest rate decision. Chair Powell will also deliver further remarks at the annual NABE Conference next week. 

"We look for headline CPI to tick up a tenth to 1.8% y/y in September (0.1% m/m) despite another monthly decline in energy prices. Core inflation should stay unchanged at 2.4% y/y, reflecting a firm 0.2% m/m advance — though slightly softer than in Jun-Aug, as core goods inflation was likely softer m/m. That said, a steady 0.2% m/m gain in services should support core prices,"

analysts at TD Securities explained. 

USD/JPY levels