USD/JPY Fundamental Daily Forecast – Bullish Traders Hoping NFP Report Shows More than 600K New Jobs Added

The Dollar/Yen is trading lower on Friday as traders prepare for the release of the October U.S. Non-Farm Payrolls report. Traders will be watching this report closely because a strong report will bring the Federal Reserve closer to raising interest rates after it finishes tapering its massive stimulus in June 2022.

Although the dollar is strengthening against a number of major currencies, it is trading lower against the Japanese Yen, which is benefitting from volatility in the global bond markets. While the Bank of Japan is set to be the slowest among developed-market central banks to normalize policy, the Japanese currency benefited as those expectations remained constant while investors cut bets elsewhere.

At 09:52 GMT, the USD/JPY is trading 113.798, up 0.043 or +0.04%.

Yen Firms after Some Major Central Banks Curtail Early Rate Hike Bets

The Japanese Yen is holding its ground against the U.S. Dollar as investors have been forced to reset monetary policy expectations this week, after some of the biggest global central banks knocked back bets for early rate hikes.

European Central Bank President Christine Lagarde pushed back on Wednesday against market bets for a rate hike as soon as next October and said it was very unlikely such a move would occur in 2022.

Also on Wednesday, Fed Chair Jerome Powell said he was in no rush to hike borrowing costs, even as the Federal Open Market Committee announced a $15 billion monthly tapering of its $120 billion in monthly asset purchases.

In the U.K. on Thursday, the Bank of England caught the market off-guard by keeping rates steady on Thursday.

Daily Forecast

On Friday, the Labor Department is expected to report that 455,000 new jobs were added to the economy in October, a notable improvement from September’s disappointing 194,000 figure.

But to really give the Fed confidence when it considers raising rates in perhaps mid-2022, the number of jobs created is going to have to come in much higher. This need for larger job numbers was emphasized by Federal Reserve Chairman Jerome Powell in his press conference on Wednesday.

“Once the delta variant really does continue to decline what’s going to happen to employment? Are we going to start to see over the winter significant increases in jobs again? If you look back to 3-6-9 month average, job creation is between 550,000-600,000… if we can get back on that path we would be making good progress,” he explained during his press conference following the November meeting.

This being said, I agree with Mr. Powell. If today’s report comes in at 455,000 as expected, I don’t expect to see any significant improvement in the short-term outlook for the Dollar/Yen. This means a few more days of weakness. If the number of jobs added comes in north of 600,000 then look for the USD/JPY to rally.