USD/JPY Takes Out 115.00 As Bulls Get Ready for NFP

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Market Drivers March 10, 2017
UK Data misses
USDJPY Takes out 115.00
Nikkei 1.48% Dax 0.65%
Oil $49/bbl
Gold $1196/oz.

Europe and Asia:
GBP UK MP -0.9% vs. -0.6%
GBP UK Trade Balance 10.8 vs. 11.1B

North America:
USD Non Farm Payrolls 08:30
CAD Employment 08:30

It’s been a typically quiet NFP night in the FX market but marked by some unusual flows as the dollar rallied against the yen but weakened against the commodity dollars and the euro a bit.

USD/JPY took out the key 115.00 resistance level in early Asia trade and moved forcefully towards 115.50 mark as the market signaled that the dollar rally is starting to resume. Since the end of last year the 115.00 figure has served as a cement ceiling for the pair with buyers failing to take out that resistance multiple times over the past few months.

Tonight’s price action suggests that currency traders are beginning to believe the US growth/rate hike narrative that the Fed has been promoting. With Fed funds futures now signaling nearly a 100% chance of an FOMC hike in March and the yield on the ten-year benchmark bond sitting above the 2.50% rate, the rally in USD/JPY is simply reflecting the new sentiment on the ground.

However, the dollar rally has not been uniform with euro holding its own as it climbed back above the 1.0600 figure while the commodity dollars rebounded as well. Certainly, the bounces have been small, but the price action reflects the fact that most of the good news for the buck may be factored in at this point.

The one exception has been pound sterling which has continued to drift lower towards the 1.2150 mark on weak manufacturing news today. Manufacturing production declined by -0.9% versus -0.6% eyed as the weaker currency is providing no boost for UK manufacturers.

Although the payroll numbers in US will be important, with the market primed for 200K+ report, the key metric for currency traders will be Average hourly earnings. If wages show another solid month of growth the year over year gains will approach 2.5% rate which should convince the market that the Fed will remain on a 3 rate hike path. Any print above the 0.3% mark could propel USD/JPY to the 116.00 level before the day is done.

Boris Schlossberg
Managing Director

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