Dollar Fights Before Key Data Publication

The US dollar is struggling in the Asian session and is set to record a weekly loss ahead of the release of US inflation data. Such information could help investors evaluate the future policy of the Federal Reserve. Last month, the FOMC said it would consider a rate hike in December with possibly another three in 2018, however, there is little certainty that that plan materializes. On Thursday, economic data showed producer prices rose 0.4% last month on a year-on-year basis. Markets now need consumer data to strengthen their sentiment.

As reported at 10:52 a.m. (JST) in Tokyo, the USD / JPY pair was trading at 112.21 yen, down 0.05%; the pair reached a low of 112.14 yen, while the maximum for the session is 112,306 yen. The GBP / USD rose to 1.327, gaining 0.07% while the EUR / USD was at 1.1845, gaining 0.12%.

BOJ to Maintain Expansive Policy

While Fed policy is still uncertain and as investors await an aggressive policy change, the Bank of Japan reported that they intend to keep the current policy ultra flexible. BOJ Governor Haruhiko Kuroda said they were disappointed by wage growth and inflation, despite a moderately expanding Japanese economy. The BOJ's inflation target is 2%, well above the real 0.5% achieved.

USD / JPY trading with 10-year US Treasury yields - Westpac

Local news flow has been light for the yen this past week, keeping focus on US yields with the USD / JPY consolidating around 113.00 with the 10-year bond holding around 2.30-2.35%, now missing the impetus to drill higher, according to Sean Callow, research analyst at Westpac.

Key Quotes

"A hurricane-damaged US employment report seems an unlikely catalyst for increased yields, although average earnings should not be affected and appear to be due to a rebound."

"Portfolio data for the last week of September showed the largest net sales of FOREX bonds by Japanese investors since April ($ 9 billion), but could be linked to the end of the semester."

"USD / JPY range to mark a slightly higher range, mostly 113.00-114.00 if USD is broadly firm.But as always, risk aversion stalks, with plenty of room for falls in the USD / JPY when I come back".

Gold falls below 1270 on the rise of US equities

The XAU / USD pair posted modest gains during the European session but lost its traction in the hours of the American session and fell into negative territory. At this time, the pair trades at $ 1279.90, losing a $ 4.75, or 0.4%, on the day.

Although the dollar began to gain strength against its peers ahead of the US session, the XAU / EUR rise held up precious metal demand, helping the XAU / USD pair keep their daily gains.

However, the sustained bullish momentum of the US dollar index and positive market sentiment forced buyers to rise further. In fact, the DXY is now at 93.80, rising 0.53% on the day. In addition, the Dow Jones Industrial Average and S & P 500 are on the way to another record daily close to maximum, and adding 0.4% and 0.45%, respectively.

Earlier in the session, optimistic data from the US fueled the rise seen in the DXY with weekly jobless claims and the trade balance both coming in better than market expectations. Moreover, the observations of members of the FOMC monetary policy on Thursday boosted the chances of a rate hike from the Fed in December, giving an additional rate rise.

However, the pair seems to have entered a phase of consolidation in the last hour as the volume of trade begins to slacken before the critical US NFP report tomorrow. Although markets expect growth payroll of 156K 90K in September, it will probably be ignored by participants, as are deemed to reflect the negative impact of Irma and Harvey hurricanes. "The negative impact on the labor market should be short-lived, as we have already seen that initial jobless claims are starting to decline again, but we do not expect a decline in the unemployment rate (although the risk is probably biased towards an increase), "say analysts at Danske Bank.

Technical perspective

On the negative side, $ 1262 (DMA of 200) remains a critical support. A decisive push below that level could open the door to $ 1251 (8 August low) and $ 1243 (July 26 low). On the positive side, the resistors are aligned on $ 1282 (maximum of 4 October), $ 1295 (DMA 20) and $ 1300 (psychological). With today's setback, the CCI indicator on the daily chart declined to -100, suggesting that the bearish momentum is building up in the short term.