USD/JPY Breaks 95 Ahead Of NFP

The Yen's weakness is the focus in today's markets as the USD/JPY pair soars through 95 psychological level. This week's job market data from US raised the expectation of a solid non-farm payroll report. Economists expect NFP to show 158k growth in February, while the unemployment rate is expected to be unchanged at 7.9%. The ADP report released on Wednesday showed a stronger-than-expected gain of 198k in February, while January's figure was revised up to 215k, making the average number for the first two months in 2013 above 200k mark. Initial jobless claims dropped further to 340k in the week ending March 13 with the four week moving average dropped below 350k market to 349k. The four week average figure was indeed the best number since early 2008. While the employment component of ISM manufacturing and services dropped to 52.6 and 57.2, both are well in the expansion region. Indeed, the employment component in ISM services was rather impressive, showing healthy gains. Expect some upside surprises in today's NFP report.

Some fresh selling was seen in the yen after China unexpectedly posted trade surplus data in February. Trade surplus narrowed to USD 15.3b, down from USD 29.2b in January, but markets were expecting a USD -8.8b deficit. Exports were strong, and jumped 21.8% yoy to USD 139.4b while imports dropped -15.2% yoy to USD 123.1b. Meanwhile, Japan's Q4 GDP was also revised up to 0.0% qoq, up from -0.1%, proving that the country avoided contraction. Overall, risk sentiments are firm in the Asian markets as major equity indices record gains, following another record high in DOW at 14329 overnight. But it seems that risk sentiments are only having some impact onthe yen, as other major currencies showed muted reactions.

European majors are generally stuck in right range against dollar. The euro rebounded yesterday following the ECB press conference, but there was no following through buying. Both the ECB and the BoE left their monetary stance unchanged. ECB President Draghi expects the eurozone should return to growth in 2014, with the forecast range between 0-2%. Inflation next year would range from 0.6% to 2%. The BOE announced it would keep the Bank Rate at 0.5%, and asset purchases at 375B pound. The committee released only a short statement and details of the discussion should not be disclosed until release of the minutes on March 20.

Looking ahead, Canadian job data will also be another focal point for today, and is expected to show 7.8k growth in February with unemployment rate unchanged at 7.00%. The USD/CAD pair had a jump earlier this week as the BoC turned more neutral, noting that policy stimulus would stay there for awhile. However, the USD/CAD is still limited below recent resistance at 1.0341. Today's job data from US and Canada could possibly trigger a breakout in the pair. Other data to be watched include the Swiss CPI, German industrial production and Canadian housing starts.