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Fundamental Summary

USD

The BLS report on Friday shows figures that are worse than forecast. In August, total nonfarm payroll employment increased by 315,000, while the unemployment rate rose to 3.7%. A rate that is higher than expected should be interpreted as negative/bearish for the USD. Also, The Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) rose from 49.9 to 54.2 in August, exceeding market forecasts. The Manufacturing Purchasing Managers' Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. Furthermore, according to payroll processor ADP, private sector hiring slowed in August due to a cooling of the labor market. As part of a revamped monthly report, the company said that private payrolls rose by 132,000 during the month, far below the consensus forecast of 300,000.

JPY

The aggregate value of capital investment made by companies in Japan was more than predicted, according to the Ministry of Finance. Capital spending by Japanese firms increased 4.6% year on year in the April-June quarter, compared to a projected 3.0% increase. Moreover, on a month-over-month basis, Japan Retail Sales increased by 0.8%, compared with much lower analysts' consensus estimates of -0.5%. On a year-over-year basis, Retail Sales grew by 2.4%. Additionally, analysts were surprised by the METI (Ministry of Economy, Trade, and Industry) results. Industrial production increased by 1.0% over the previous month and -1.8% year on year in July.

Our Opinion

Given the current balance of positive and negative influences affecting the USD/JPY and as long as the Fed maintains its aggressive policy and cyclical worries put pressure on risky assets, the fundamental outlook for the USD is "BEARISH" and for the JPY is "BULLISH".