FSMNews

Japan’s economy remained steady in the second quarter of fiscal 2016, with USD dropping 0.64% against the JPY at 101.23 at the close.

The pair is changing hands at 101.33 in the Asian session, with the USD trading 0.1% higher against the USD from Friday’s late trade.   

Meanwhile, overnight data suggest an unexpected stagnation on Japan’s preliminary gross domestic product (GDP) on a quarterly basis in the second quarter of fiscal 2016, amid declines on exports and corporate investment.

Hearing this, the central bank remained pressured and is expected to add another stimulus to help lift growth. Thus, markets are expecting the economy to grow 0.2%, compared to a 0.5% gain in the last quarter.   

The Japanese yen had shown some strength amid Wednesday’s session last week, after USD/JPY changed hands at 101.30.

Japan’s Core Machinery Orders showed an 8.3% strong gain, topping analysts’ estimates, while the Japanese Tertiary Industry Activity added 0.8%, exceeding forecasts as well.

Given the strong improvement in machinery orders, indicator’s suggest a solid gain in 5 months. However, the inflation remained bleak as PPI dipped 3.9% in July.     

Another significant indicator, the US Nonfarm Payrolls sparkled in July, as markets were surprised with a strong gain of 225,000, beating the 180,000 estimates.

As shown in the chart below, investors are closely watching on Mario Draghi decision about the ECB bond buying program, which disappointed the market supply. Thus, the currency pair tried to break out on the upside at a resistance level of 105.21 and continued on a downward trend from July 21 until July 29.

FSMNews

The pair showed some earlier strength on the Japanese Core Machinery Orders and followed a downward  trend as investors eyed on BOJ Governor Haruhiko Kuroda meeting with trust banks, including the speech of US Treasury Secretary Jack Lew, and the Federal Reserve statement on discount rates, which declined in four consecutive days from July 4 until July 8 with a 4.352 basis points and further dipped until April 11 at 107.931 at the close.

FSMNews

Conclusion

As investors are closely watching on the important decisions on the ECB report, we concluded that this will have a significant effect on the currency pairs. Therefore, as nonfarm payrolls are released in every month, it heavily affects the US dollar, including the bond market and the stock market.

Further, USD/JPY is expected to decline as the yen could drag the dollar with its disappointing gross domestic product (GDP) result, including the stimulus package decision that is highly anticipated to weigh also.