USD/JPY Fundamental Analysis – week of September 5, 2016

The USD/JPY closed the week on a high note at 103.91 which is helping to relieve some of the stress on Japanese exporters. The strength of the US dollar and the move away from safe haven is helping the yen to dip a bit. The pair remains a strong sell with a drop climb of 2% this week. The weaker-than-forecast monthly labor-force number comes after the previous two readings exceeded expectations. Slowing jobs growth threatens to derail the Fed’s ability to boost borrowing costs after Chair Janet Yellen said last week that the case for higher rates has strengthened.

Traders saw about a 22 percent probability of a Fed rate increase this month, down from 34 percent before the report, and a 55 percent probability of a hike in 2016, down from 59 percent, according to futures data compiled.

The U.S. dollar broke the key 103-level against the Japanese yen in early European deals on Wednesday, as stronger-than-expected U.S. consumer confidence data cements bets that the Federal Reserve is moving closer to hike interest rates. Data from the Conference Board showed that the consumer confidence rebounded strongly in the month of August, reached its highest level since September 2015.

The Conference Board said its consumer confidence index jumped to 101.1 in August from a downwardly revised 96.7 in July. Economists had expected the index to come in unchanged compared to the 97.3 originally reported for the previous month.

Investors await ADP’s private sector payroll report due later in the day, which serves a prelude to Friday’s key jobs data.

The economy is expected to create 175,000 private sector jobs in July, after an addition of 179,000 jobs last month. The data is of great significance since several top Fed officials intensified expectations over a near-term interest rate hike by the Federal Reserve.

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This Week’s Economic Events That You Should Be Monitoring:

Government Bond Auctions

Date Time       Country           Auction

Sep 06 11:00 Austria Holds bond auction

Sep 06 11:30 UK 1.5% 2026 Gilt

Sep 06 11:30 Germany Holds I/L bond auction

Sep 07 10:30 Denmark Holds bond auction

Sep 07 11:03 Sweden Holds bond auction

Sep 07 11:30 Germany Eur 5bn 0% Aug 2026 Bund

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction