USD/JPY: Trading the US Non-Farm Payrolls



The Non-Farm Employment Change measures the change in the number of newly employed people in the US, excluding workers in the farming industry. A reading which is higher than the market forecast is bullish for the dollar.

Here are the details and 5 possible outcomes for USD/JPY.

Published on Friday at 12:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, the publication of employment data is highly anticipated by the markets, and an unexpected reading could affect the direction of USD/JPY.

Non-Farm Employment Change has fallen below the market forecast for four straight months, clearly a worrying trend. The market estimate for the July reading stands at 101 thousand newly employed people. Will the indicator rebound this month and meet or beat the forecast?

Sentiment and Levels

Even if Mario Draghi doesn’t deliver on his strong declarations, USD/JPY has room to rise: more deflation in Japan gives more room for the BOJ to intervene, either by printing money or direct FX intervention. In addition, the markets were yet again disappointed as the Fed refrained from introducing QE or other monetary easing. Thus, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom:  80, 79.70, 79.10, 78.68, 78 and 77.50.

5 Scenarios

  1. Within expectations: 85K to 115K. In such a scenario, the USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 116K to 131K: An unexpected higher reading can send  USD/JPY above one resistance line.
  3. Well above expectations: Above 131K: The chances of such a scenario are low. Such an outcome would prop up the pair, and a second resistance line might be broken as a result.
  4. Below expectations: 71K to 84K: A smaller increase than forecast could cause USD/JPY to fall  below one level of support.
  5. Well below expectations: Below 71K. In this scenario, the USD/JPY break a second support level.

For more about the USD/JPY, see the USD to JPY forecast.




About

Kenny Fisher - Senior Writer

A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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