Friday's US non-farm payrolls report is expected to show that the US economy added 90,000 jobs in September, down from 156,000 in August due to disruptions caused by hurricanes in the country. The jobless rate is seen remaining steady at 4.4% in September.
The average hourly earnings are seen rising 0.3% m/m in September vs. 0.1% growth seen in August.
Lead indicators say the NFP could beat estimates
- The ISM non-manufacturing employment index increased by 0.6 percentage points in September to 56.8 percent from the August reading of 56.2 percent.
- Payroll processor ADP said the private sector added just 135,000 jobs in September, although the actual print did beat the estimate of 131,000.
- The ISM manufacturing employment index rose to 60.3 from 59.9
- Jolts report showed - Job openings in the US climbed to record 6.17 million in July
- The conference board consumer-confidence index slipped to 119.8 from a revised 120.4 in August.
Except for the drop in the consumer confidence, all other lead indicators favor a better-than-expected payroll reading.
In any case, the USD is unlikely to be offered unless the NFP prints below 50K and/or the wage growth figure misses estimates by a big margin.
Japanese Yen is a sitting duck
The Bank of Japan [BOJ] is not even close to considering QE taper or policy tightening. The Bank of Japan (BOJ) Summary of Opinions at the monetary policy meeting on September 20/21 published on September 29 showed a growing consensus among policymakers on the need for easy policy further given the expected impact on the economy from a scheduled sales tax hike.
Meanwhile, the Fed will begin trimming its balance sheet from October and is widely seen raising rates in December. The monthly chart of the 10-year treasury yield shows a nice inverse head and shoulders formation [T-yield and USD/JPY have strong positive correlation]. Thus, the Japanese Yen is a sitting duck.
Therefore, the USD/JPY pair could see a convincing break above the 113.00 handle if the NFP beats estimates and the wage growth numbers match estimates/beat estimates.
On the other hand, a weaker-than-expected wage growth numbers would amplify the negative effect of the technical failure in the USD/JPY pair at 113.00 levels and shall open doors for a drop to 111.00 levels.
Technicals - Pull back is gathering steam
4-hour chart
Observations
- Repeated failure to close above 113.00 despite the upbeat US ADP and ISM non-manufacturing data
- Bearish symmetrical triangle breakdown on the chart above
- Bearish RSI divergence
View
- USD/JPY is likely to test 112.32-112.00 levels in the run-up to payrolls release.
- A weaker-than-expected US wage growth number could send the pair down to 111.43 [200-DMA] - 11.00 levels.
- On the other hand, strong data could yield an end of the day close above 113.00. Such a move would open doors for a rally to 115.00 levels.
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