The US dollar has posted modest gains against the yen in Thursday trading, reversing the trend we have seen for the past couple of days. USD/JPY is trading in the mid-97 range in the European session. In economic news, today’s highlights are ISM Non-Manufacturing PMI and Unemployment Claims. The markets are expecting weaker numbers from both indicators. Meanwhile, the government shutdown continues, as Congress has been unable to reach an agreement that would end the budget impasse. There are no Japanese releases on Thursday.
The US government remains paralyzed as the battle in Congress continues over the federal budget. With the government lacking funds to operate, it has been forced to close non-essential services and send almost a million government workers home. The Republicans and Democrats are entrenched in their positions, but public resentment may force the politicians to get their act together quickly. If things are resolved sometime this week, it will have been more of a nuisance than a crisis. However, a much more serious crisis could occur in two weeks if Congress doesn’t reach an agreement on raising the debt ceiling. If that happens, the Treasury would be unable to pay all of its bills, and the economic fallout could be tremendous. With all the bad blood between the Democrats and Republicans, reaching an agreement on the debt ceiling could prove a difficult task.
In Japan, there was good news earlier this week from the well-respected Tankan indexes. The Tankan Manufacturing Index jumped from 4 to 12 points, easily beating the estimate of 7 points. The Tankan Non-Manufacturing Index also rose, rising from 12 to 14 points, matching the forecast. This was the best showing for both indicators since November 2007, and is further indication that the Japanese economy continues to pick up steam.
The Federal Reserve surprised the markets in September when it didn’t taper QE, and the next dates to circle are October 29- 30, when the Fed holds its next policy meeting. Employment data will be an important factor in the Fed’s decision, and ADP Non-Farm Employment Change did not impress in September. The indicator dropped from 176 thousand in August to 166 thousand in September, a four-month low. The estimate stood at 177 thousand. Later on Thursday, we’ll get a look at Unemployment Claims. The markets are expecting a higher reading, which certainly does not bode well for a scaling down of QE later this month. 
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USD/JPY- USD/JPY has moved higher in Thursday trading. The pair touched a low of 97.25 in the Asian session but has rebounded.
- The pair is testing resistance at 97.87. This line could fall if the dollar continues to improve. Next, there is resistance at 98.64.
- On the downside, USD/JPY continues to receive support at 97.18. This is followed by support at the round number of 96.00.
- Current range: 97.18 to 97.83
Further Levels
- Below: 97.18, 96.00, 95.06 and 94.20
- Above: 97.83, 98.43, 99.45, 100, 100.85 and 101.66
USD/JPY ratio is pointing to movement towards short positions in Thursday trading. This is not reflective of what we are currently seeing from the pair, as the US dollar has reversed directions and has posted gains against the yen.
USD/JPY continues to trade in the mid-97 range. We could . We could see some volatility from the pair in the North American session, as the US releases key employment and services data later in the day.
USD/JPY Fundamentals
- 11:30 US Challenger Job Cuts.
- 12:30 US Unemployment Claims. Estimate 315K.
- 14:00 US ISM Non-Manufacturing PMI. Estimate 57.2 points.
- 14:30 US Natural Gas Storage. Estimate 96B.
- 17:30 US FOMC Member Jerome Powell Speaks.
*All release times are GMT
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