USD/JPY Fundamental Daily Forecast- Bullish Average Hourly Earnings Could Fuel Breakout Over 113.251
The Dollar/Yen closed higher on Thursday and in a position to challenge the September 27 high at 113.251. This level is important because rising volume could trigger a breakout over this level, setting up the Forex pair for an eventual test of the July 11 top at 114.492.
The USD/JPY settled at 112.813, up 0.060 or +0.05%.
The Dollar/Yen was underpinned on Thursday in reaction to after another day of better-than-expected economic data. Gains were likely limited by position-squaring and general worries ahead of Friday’s U.S. Non-Farm Payrolls report. Other data showed that investors were pricing in an 83 percent chance of a December rate hike by the U.S. central bank.
Another day of record highs in the U.S. stock market also supported the Dollar/Yen because of the carry trade. It was a strong sign that investors are more comfortable buying risky assets than putting money in lower-yielding, safe-haven assets.
On Thursday, Fed Governor Jerome Powell said more rules and regulations are not always the best solution to problems in financial markets and U.S. government agencies must take a balanced approach to such decisions.
Federal Reserve Bank of San Francisco President John Williams said moderate growth and his outlook for higher inflation will allow the U.S. central bank to raise interest rates. Williams said the long-term trend in annual U.S. economic growth may be as low as 1.5 percent. This implies that perpetually low interest rates and a difficult hurdle for the Trump administration’s promised economic surge.
Kansas City Fed President Esther George said the Fed will need to raise interest rates further to keep the economy on track to full employment and the central bank’s 2 percent inflation goal.
Philadelphia Fed President Patrick Harker said on Thursday that he’s “penciled in” a move in December and three hikes next year.
Forecast
The fundamentals are bullish for the USD/JPY but buyers have to come in strong and with big volume to breakout over 113.251 or prices could continue to remain rangebound.
The Non-Farm Employment Change is expected to show the economy added 82,000 jobs in September. The number is expected to be low due to the impact of hurricanes Harvey and Irma.
Average Hourly Earnings are expected to come in at 0.3%. The Fed pays close attention to this part of the report so a stronger number will increase support for a December rate hike. A lower number will raise some issues, but shouldn’t derail the Fed’s plans.
The unemployment rate is expected to come in unchanged at 4.4%.
In addition to the NFP report, traders will have a chance to react to comments from FOMC Member William Dudley and FOMC Member Robert Kaplan.
We’re going to be paying close attention to the Average Hourly Earnings number. A figure greater than 0.3% could launch a breakout to the upside. A lower than expected number could cause some uncertainty which could encourage long investors to book profits.
This article was originally posted on FX Empire
