Forex Market: USD/JPY hovers near two-month highs on upbeat US non-farm payrolls, factory orders

The yen declined for a fifth straight day, touching the weakest level in more than two months against the US dollar, after a report by ADP showed US companies boosted non-farm payrolls in March by the most in three months, indicating the labor market is gaining traction and as factory orders rose more than expected in February.

USD/JPY hit a session high at 103.94 at 01:30 GMT, after which consolidation followed at 103.77, adding 0.1% on a daily basis. Support was likely to be received at April 1st low, 103.09, while resistance was to be met at January 23rd high, 104.84.

Demand for the US dollar was supported after a report by the US Census Bureau revealed that nations factory orders rose 1.6% in February, after a revised 1% drop in the previous month, which was higher than previously reported and exceeding analysts forecasts for a 1.2% gain. The indicator reflects current industrial activity in the country and also provides clues over sector development in the future.

In addition, the US private sector added 191 000 workers last month after February’s number was revised up by 39 000 to 178 000, a report by Automatic Data Processing Inc. (ADP), showed today. However, analysts’ forecasts called for a 195 000 gain in March.

“We’re starting to see the recovery in the data that we’ve been hoping for,” Brett Ryan, an economist with Deutsche Bank Securities Inc. in New York, commented ahead of the report, cited by Bloomberg. “This is going to provide policy makers and market participants alike a modicum of confidence that the data swoon over the last couple months is weather-related and not a sign of something more ominous.”

The ADP report usually comes out two days before the official employment report by the Bureau of Labor Statistics (BLS), thus, providing clues over the tendency in nation’s non-farming sector. The government report scheduled to be released on Friday may show private payrolls rose by 200 000 last month, according to the median experts’ forecast.

Meanwhile, earlier in the week, Japanese companies showed confidence in the government efforts to fight against deflation, which persists in the country for over 15 years. According to the Bank of Japans Tankan monthly survey, respondents expected consumer prices to rise 1.5% in one year time and 1.7% in three years.

A government report showed last week that the Japanese jobless rate declined to 3.6% last month, the lowest in more than six years, from 3.7% in January. The jobs-to-applicants ratio also increased to 1.05 last month from 1.04 in January, in line with analysts’ estimates and matching the highest since August 2007. This indicates that there were 105 job offers for every 100 job seekers.

The number of unemployed people declined in February for the 45th consecutive month, dropping by 450 000 from a year ago to 2.32 million people, data from the report revealed. All these data points, added to signs of a robust labor market, which in turn will lead to higher consumer spending.

Moreover, consumer price inflation in Tokyo surged 1.3% in March from a year ago, beating projections for a 1.2% rise and following 1.1% gain in the prior month.

Core consumer price inflation, which excludes fresh food, also advanced by 1% this month from the previous year, more than the 0.9% increase predicted by analysts and after a 0.9% gain in the previous month.

Elsewhere, EUR/USD hit a session high at 1.3820 at 06:30 GMT, after which the pair trimmed gains to trade little changed at 1.3784 by 13:15 GMT, losing 0.06% for the day. Support was likely to be received at April 1st low, 1.3769, while resistance was to be met at March 26th high, 1.3823.