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The Dollar/Yen is inching higher early Friday, shortly ahead of the release of the U.S. Non-Farm Payrolls report at 1230 GMT. Short-term, the dollar is being supported by safe-haven buying tied to the escalation in trade tensions between the United States and China.
At 0929 GMT, the USD/JPY is trading 111.716, up 0.071 or +0.06%.
Long-term, the Dollar/Yen is being underpinned by Wednesday’s hawkish U.S. Federal Reserve monetary policy statement which widens the divergence with the dovish Bank of Japan. The Fed plans to raise rates at least two more times in 2018 and perhaps as many as three times in 2019. Earlier this week, the BOJ said it plans to leave interest rates at ultra-low levels but may tweak its bond-purchasing program.
In economic news, the services sector in Japan continued to expand in July, albeit at a slower pace, the latest survey from Nikkei showed with a PMI score of 51.3, down from 51.4 in the previous month.
Minutes from the Bank of Japan’s June 14 and June 15 meeting showed that board members were worried about soft inflation and the rising cost of ultra-loose monetary policy.
Forecast
Later today at 1230 GMT, the U.S. will release its latest Non-Farm Payrolls report. The Non-Farm Employment Change is expected to show an increase of 190K. The unemployment rate is expected to decline to 3.9% and Average Hourly Earnings are expected to come in at 0.3%, up from 0.2%.
Also at 1230 GMT, investors will get the opportunity to react to the U.S. Trade Balance report. It is expected to come in at -46.5 billion, up from -43.1 billion. Final Services PMI at 1345 GMT is expected to remain unchanged at 56.2. Finally, the major ISM Non-Manufacturing PMI is expected to come in at 58.6, down from 59.1.
Technically, the main trend is up according to the daily swing chart, however, momentum turned lower with the formation of the closing price reversal top on August 1 and the subsequent confirmation on Thursday.
A trade through 112.152 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend changes to down on a move through 110.588.
The minor trend is also up. A trade through 111.317 will change the minor trend to down. This will also confirm the shift in momentum to down.
The major support is the 50% to 61.8% retracement zone at 110.868 to 109.673. This zone provided support on July 26 at 110.588 and on July 31 at 110.765.
The main range is 113.210 to 110.588. Its retracement zone at 111.899 to 112.208 is resistance. This zone stopped the rally at 112.152 on August 1.