USD/JPY risks finely balanced ahead of payrolls
Sept 5 (Reuters) -The action in G10 FX remains largely centered around the Japanese yen, which appears to be the cleanest way to trade the latest U.S. dynamics. Consequently, with markets reacting to incoming U.S. data, USD/JPY has seen yet another choppy session, dropping to a low of 142.86 after a soft ADP report, before reclaiming 144 on the back of a robust ISM services PMI print.
In any case, the narrative is unchanged, it all comes down to Friday’s payrolls data, which should determine whether the Fed’s cuts 25 or 50bps at the September meeting
While ADP was notably weaker at 99k, compared the street estimate of 145k, as has been covered at length previously, the link between ADP and NFP is tenuous at best. The average deviation between the two data points in the last two years is 63k. Though, while traders may slightly lean in favor of a softer NFP report, the risks remain finely balanced.
There is clearly enough appetite to sell dollars in the event of a weak jobs report, opening the door to a 140 test in USD/JPY. Meanwhile, we could just as easily retest the weekly high at 147.20 on the back of an upside surprise.
It is also noteworthy that Fed rate-setter Christopher Waller will be speaking after the payrolls data on Friday. With Waller's comments coming just before the pre-meeting blackout period, anything he says on the data, the economy or policy could set the tone for the FOMC meeting.
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USDJPY short term data reaction https://tmsnrt.rs/4gaJoRv
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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