The explosive non-farm payroll situation is about to begin! Beware of the yen soaring again
Forex strategist predicts that if the US non-farm payroll data is positive tonight, the Japanese yen against the US dollar may test the high in August. Strategist Gareth Berry said that if the non-farm unemployment rate rises to 4.4%, the US dollar against the Japanese yen will be "in trouble". Data shows that the yen has risen for four days, and if it rises another 1%, it will break through the 141.70 level. Morgan Stanley strategists predict that the yen will continue to rise, and options traders believe there is a 66% chance of breaking the high on August 5 in the near term. If the data falls short of expectations, the US dollar may fall back to the low point in early August
Foreign exchange strategists believe that if tonight's US non-farm payroll data boosts bets on a significant rate cut by the Federal Reserve this month, the USD/JPY exchange rate is very likely to test the August high on Friday.
Gareth Berry, a strategist at Macquarie Group, stated that if there are any surprises in these data, the yen "will be in play." Based in Singapore, Berry mentioned that if the non-farm unemployment rate rises to 4.4%, the USD/JPY could "find itself in trouble."
Strategists from JP Morgan and Mizuho Securities also see these data as potential catalysts for the yen's continued strength. These data could be a decisive factor in whether the Fed cuts rates by 25 basis points or 50 basis points. The USD/JPY exchange rate has been rising for the fourth consecutive day, needing just another 1% increase to break the 141.70 level set during the global market turmoil on August 5.
The yen's trend is highly correlated with Fed policy bets
JP Morgan has increased its existing yen long positions through put options, as US employment data may fall below economists' expectations, triggering a 50 basis point rate cut. Strategists James Nelligan and Patrick Locke wrote in a research report on September 5 that the expected outcome "gives us confidence to provide further support for funding currencies, including the yen."
According to data compiled by Bloomberg, options traders believe that in the coming week, there is nearly a two-thirds chance that the yen will break the August 5 high, with a 35% chance of surpassing 140.
Shoki Omori, Chief Strategist at Mizuho in Tokyo, stated, "The USD/JPY could easily fall below 142. Testing 141 is realistic if there is momentum."
Mahjabeen Zaman from Australia and New Zealand Banking Group Limited shares the same view. She mentioned that due to weaker-than-expected data, the USD "may test the early August lows."