USD/JPY Fundamental Daily Forecast – Early Strength Indicates Traders Betting on Bullish Jobs Report

The Dollar/Yen is trading higher on Wednesday, driven by increasing demand for risky assets and rising U.S. Treasury yields. Gains are likely being capped by low volume ahead of the U.S. Non-Farm Payrolls report, due to be released at 12:30 GMT. The catalyst behind the strength is optimism over U.S.-China trade negotiations as both parties move closer to inking a trade deal that will bring an end to the more-than-year-long trade dispute.

At 09:50 GMT, the USD/JPY is trading 111.717, up 0.075 or +0.07%.

Helping to underpin the Dollar/Yen is a positive outlook for U.S.-China trade relations. According to official state news website Xinhua, Chinese Vice Premier Liu He said a new consensus has been reached between China and the U.S. on the text of a trade agreement that they are negotiating.

Chinese President Xi Jinping, through a message conveyed by Liu, told Trump that both sides have made new and substantial progress on key issues regarding trade in the past month, according to Xinhua. Xi said he hopes both sides will continue to work together to conclude talks on the trade text as early as possible, Xinhua reported.

Finally, President Trump said on Thursday that “we’ll know over the next four weeks” if the two countries have a deal.

As far as the Non-Farm Payrolls report is concerned. Here’s what investors are expecting. The Non-Farm Employment Change is expected to show the economy added 172,000 jobs in March. The Unemployment Rate is expected to remain at 3.8%. Average Hourly Earnings are expected to have risen by 0.3% for the month.

Daily Forecast

The direction of the USD/JPY on Friday will be determined by the direction of Treasury yields and appetite for risk. The table has been set for a strong rally into a pair of tops at 111.940 and 112.137, but bullish traders will want to see a strong jobs report to prove that last month’s dismal 20,000 headline figure was a fluke.

Even if the jobs report is weaker than expected, optimism over a US-China trade deal should be enough to keep the rally afloat although traders may use a weak report as an excuse to book profits and trim long positions.