It appears that traders have been positioning themselves ahead of what they expect to be a positive week for US macro data.
The data drop starts tonight with US ISM manufacturing PMI at (22:00hrs SGT). The consensus forecast is for a print of 57.0, holding close to July’s eight-month high reading of 57.1.
Signs of an improving economy are likely to help strengthen the greenback. Last week, USD/JPY broke through its four-month high, confirming an uptrend.
The main focus will be on Friday’s non-farm payroll numbers, where the market consensus is for an improved print of 225,000 in August versus the 209,000 seen in July.
There could be other positive leads down the week, market expectations are for the unemployment data to improve.
The Japanese currency is also likely to see further pressure on Thursday, when the Bank of Japan is scheduled to give a monetary policy statement. This is expected to take a dovish tone, which is in line with the comments by BoJ Governor Haruhiko Kuroda during last month’s Jackson Hole summit where he signalled his readiness for more stimulus.
A pullback in USD/JPY will present an attractive opportunity to buy on dips, especially around the current support level at 104.10.