Date: 08 Mar 2019

The greenback remains well supported across the board as markets participants await the Non-farm payrolls job report from the world’s largest economy. February’s U.S job report is expected to show that 180,000 new jobs were created last month, with U.S average hourly earnings expected to increase to on a month-on-month comparison basis.

The U.S unemployment rate is also expected to tick-down to 3.9 percent, beating January’s 4.0 percent number. The U.S employment sector has remained a bright spot for investors, with January’s headline number easily beating expectations, with a bumper 304,000 new jobs added to the American economy during the first month of 2019.

Economic data from last month has been providing mix signals, with the all-important ISM manufacturing survey and U.S retail sales data all coming in much weaker than expected, while employment and the nation’s manufacturing PMI both showing solid growth.

Aside from the headline jobs figure, investors are likely to fixate on wage growth inside today’s job report, as U.S inflation continues to underperform. With inflationary pressures muted, the Federal Reserve currently has few incentives to increase interest rates this year, particularly in an environment of slowing global growth.U.S President Donald Trump reiterated his desire for a weaker U.S Dollar earlier this week, as he once again reaffirmed his preference for Federal Reserve Chair Jerome Powell to keep U.S rates on hold. Until a strong upward trend occurs in U.S inflation, the market is likely to expect the Federal Reserve to sit-on-fence and hold rates at current levels.

 

USD/JPY Daily Mountain Chart | Source: ActivTrader

USD/JPY Daily Mountain Chart | Source: ActivTrader 

 

The U.S Dollar is likely to firm broadly if the monthly jobs figure and U.S wage data outpaces market expectations, with further strong gains likely in the USD/JPY pair. If we see the Non-farm payrolls job report coming in line with market expectations, the USD/JPY pair should still remain well supported around the 111.00 level.

The risk-sensitive pair is awaiting the outcome of Sino-U.S trade negotiations, with the upside bias likely to remain while investors continue to expect that negotiators from Beijing and Washington can eventually find common ground. Key resistance for the USD/JPY pair is found at the 112.20 and 112.75 level while downside support is found at 111.30 and 110.90 levels.

 

Written by Nathan Batchelor, External Analyst

 

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