This coming Friday we will get the monthly release of the Non Farm Payrolls, which will give us a pretty clear outlook of the Federal Reserve’s future actions, in regarding to further Interest rate hikes in the next few months. Based on recent comments by a few FOMC voting members and Janet Yellen herself, the Fed is intent to start raising rates in the next few months, and a solid report in Friday’s NFP, will solidify that notion and cause significant movement for the US dollar against other major currencies. The trade I will be focusing on is the USD/JPY which I think has the biggest potential for a big move.
The Dollar is still down over 11% since the beginning of the year against the Yen, although after hitting multi year lows back in the beginning of the month we have seen a 600 pip climb, mainly based on the renewed optimism in the Global Stock Markets and hawkish comments made by Federal Reserve officials in recent weeks. Right now Traders are looking for a solid report this Friday of around 200,000 new jobs, and a small increase in the average hourly wages, if this scenario occurs we can expect the USD/JPY to continue it rally and surpass the 112.00 mark and possibly head up to the 114-115 range after that. To best position ourselves I recommend buying USD/JPY in the days before the NFP on dips below 111 and looking to get out at around 112 before Friday.
The second part of the Trade will occur during the actual release of the report, were we will be setting up Pending BUY orders roughly 30 pips above the actual market price, in the event of a solid report we will be looking for targets of 113.35 and later of 114.260.
My bottom line is this, I expect to see a solid report and see the USD/JPY back at 115 by early next week.