FxWirePro: USD/JPY in tough spot heading to NFP

The U.S. consensus Bureau would soon be publishing the much-awaited non-farm payroll (NFP) report, a key U.S. Labour market statistics, which would be a vital piece of a docket in understanding the underlying strength of the U.S. economy, and also to assess whether the Federal Reserve would reduce rates as early as July.

The report would be released at 12:30 GMT and the median expectation suggests that the U.S. economy is expected to create 160,000 new jobs. ADP employment report earlier this week 102,000 for June, a much weaker number compared to last year, but much better than 27,000 in May.

How might USD/JPY move?

• The pair is in quite a strange spot. Should NFP comes weaker than expected, USD would weaken, which might push USD/JPY lower. But that will increase the probability of rate cuts from the Fed, and push equities higher, and trigger risk affinity.
• If the report comes stronger, USD/JPY would move higher, but equity market selloff would limit gains.

However, USD/JPY has been moving along the yield spread (U.S. - Japan) for past weeks, and we expect the change in rates to play a critical role in today’s NFP.

USD/JPY s currently trading at 108.1