USD/JPY Fundamental Daily Forecast – Weak Report Could Plunge Dollar/Yen into 106.471 to 105.997

The Dollar/Yen is trading lower on Friday as investors await the release of the U.S. Non-Farm Payrolls report. Analysts are saying the report should show that hiring is slowing, but the September jobs report should be just solid enough to suppress the onset of recession. Nonetheless, investors will be going through the report with a fine tooth comb as they search for weakness in the economy. The NFP report is due to be released at 12:30 GMT.

At 10:37 GMT, the USD/JPY is trading 106.724, down 0.184 or -0.17%.

Economists predict the U.S. economy created 145,000 jobs in September, up from 130,000 in August, with unemployment holding at 3.7%. Wages are expected to have risen by 0.3% in the month.

“It’s not a terrible number. It’s not a great number. We only need 100,000 to stabilize the unemployment rate,” said Diane Swonk, chief economist at Grant Thornton. Swonk expects 125,000 payrolls were added in September, and unlike some economists, she does not expect to see much impact from the government hiring of census workers for several months.

“We were growing at more than 200,000 jobs a year ago, and we’ve slowed consistently over the year. Some of it is we’ve run out of workers, and there are some soft spots, like manufacturing and retail,” she said.

Technically, the USD/JPY is in a downtrend. The downtrend resumed this week when weak economic data drove investors into the safety of the Japanese Yen.

Furthermore, at the end of the Thursday’s session, expectations for an October rate cut jumped to 93.5% from 77% on Wednesday, according to the CME Group’s Fed Watch tool. Last Friday, this tool indicated a 20% chance of a 25-basis point rate cut at the Federal Reserve’s monetary policy meeting on October 29-30. This news is putting pressure on the U.S. Dollar.

Daily Forecast

A better-than-expected jobs report could lower the chances of a Fed rate cut. This could trigger a short-covering rally in the USD/JPY.

A weak report is likely to drive up the chances of a Fed rate cut and this should put pressure on the USD/JPY.