Outlook for USD/JPY cross during the upcoming week

US dollar demostrated a strong rally against the Japanese yen on trading Friday, supported by the unexpected increase in US non-farm payrolls during October, which also boosted speculation that the Federal Reserve Bank may consider a scale back of its stimulus program sooner than expected.

USD/JPY closed at 99.09 on Friday, soaring 1.01% on a daily basis, following the seven-week high, registered at 99.41 on Thursday. The pair recorded gains for a second consecutive week to end this current week 0.46% higher. Support was likely to be received at November 7th low, 97.65, while resistance was to be met at November 7th high, 99.41.

According to data published by the Bureau of Labor Statistics, employers in the United States unexpectedly added more job positions than projected in October. Non-farm payrolls increased by 204 000 in October, well above the expected 120 000 new jobs and above the revised up number of 163 000 jobs, added in the previous month (the figure was 148 000 previously). August’s result has also been revised up to 238 000 jobs from 193 000 job positions previously. This result suggested that nation’s labor market has probably become resilient enough, so that the Federal Reserve Bank could begin to taper its monthly asset purchases soon.

At the same time, the rate of unemployment in the country, evaluated on the basis of another survey, increased to 7.3% in October, in line with expectations, from 7.2% in September. The major factor behind this higher rate have been the government workers, taking a temporary leave due to the 16-day partial shutdown throughout the month. They have been classified as jobless during the survey period, despite the fact they have begun working again later in October.

These data points came out one day after it became clear that US economy expanded at a sharper than expected rate during the third quarter of the year. Nation’s Gross Domestic Product rose at an annualized rate of 2.8% in Q3, following the 2.5% expansion in Q2, and marking the best quarterly performance this year. Expectations pointed a 2.0% increase in GDP. This report has been delayed due to the 16-day partial government shutdown in the country, but however, it encompasses all fundamental data. Consumer spending, which comprises over two thirds of US GDP value, rose 1.5% during the third quarter of the year, marking the slowest annual rate of increase during the past three and a half years. In Q2 consumer expenditures increased 1.8%. US consumers have spent more on durable goods and less on services.

Meanwhile, during the upcoming week investorsattention will be focused on Thursday’s US Senate hearing, which is expected to confirm Janet Yellen as the first chairwoman of the Federal Reserve Bank. At the same time, Japan is to release a report on its preliminary Gross Domestic Product during the third quarter of the year.

Taking into consideration the events and reports, scheduled for announcement in the week ahead, those most likely to influence the USD/JPY cross are listed as follows:

On Monday (November 11th) Japan will release data on its current account and trade balance.

On Tuesday (November 12th) Japan is to show data on consumer confidence and activity in the tertiary industry.

On Wednesday (November 13th) Japan will release a report on machine orders, a crucial indicator for nations production activity.

On Thursday (November 14th) Japan is expected to report on its preliminary Gross Domestic Product during the third quarter and the index of industrial production for September. The United States will show a weekly report on initial jobless claims, followed by a report on trade balance for September.

On Friday (November 15th) the United States will report on industrial production and import price index for October, while the Federal Reserve Bank will show results of a survey, encompassing manufacturers in the region of New York.