USD/JPY Fundamental Daily Forecast – No Surprises in Fed Minutes as Focus Shifts to Friday’s US Jobs Report

The Dollar/Yen is trading flat on Thursday as investors continue to digest the Federal Reserve’s meeting minutes, released last Wednesday, while awaiting the next major U.S. economic release on Friday.

Traders have been primarily focused on the movement in U.S. Treasury yields this week. Their volatile trade has produced two-sided swings in the Forex pair, with only a modest gain since last Friday’s close at 135.240.

At 06:21 GMT, the USD/JPY is trading 135.863, down 0.056 or -0.04%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $68.87, down $0.08 or -0.12%.

Little Reaction to Fed Minutes

The USD/JPY is showing little reaction to the Fed meeting minutes released late Tuesday that revealed officials in June emphasized the need to fight inflation even if it meant slowing an economy that already appears on the brink of a recession.

“Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the documents said.

The news didn’t move the needle much because it was no surprise. Fed officials including Chairman Jerome Powell have been hammering that message for weeks.

Traders Awaiting Friday’s Non-Farm Payrolls Data

The limited price action after the minutes suggests traders have moved forward and are more interested in the U.S. Non-Farm Payrolls report on Friday. The results of the jobs report could set the tone of the next Fed policy meeting on July 26-27.

A weaker-than-expected report could encourage the Fed to raise its benchmark 50 basis points. A stronger-than-expected report could lead to a 75 basis point rate hike.

Short-Term Outlook

On Thursday, traders will get the opportunity to react to a few minor economic reports that could have a little impact on the price action. These reports include the Challenger Job Cuts report, weekly Unemployment Claims and the U.S. Trade Balance.

Yesterday, several notable data points came in higher than expected, including June’s ISM non-manufacturing PMI reading and May’s JOLTs Job openings.

The JOLTS report indicated job openings fell sharply in May but still far outnumbered the level of people looking for work, the Bureau of Labor Statistics reported Wednesday. Despite the decline, the level of job openings was better than the 11.04 million estimate from FactSet.

Looking ahead, analysts expect the pair to stay above 130 by year-end, although only seven of the 61 respondents expect it to be weaker than it is now, with four of those predicting a surge to 140, a Reuters poll showed.