FX Daily Strategy: Asia, Sep 4

We expect August’s non-farm payroll to rise by 75k both overall and in the private sector, still moderate but the strongest in both series since April. We however expect unemployment to correct higher to 4.2% after falling to 4.1% in July from 4.2% in June and before that three straight months at 4.3%. We expect a 0.2% increase in average hourly earnings, where trend has slowed in recent months. July’s non-farm payroll saw a decline of 23k, with two prominent negatives. Leisure and hospitality fell by 40k after a 43k decline in June, which erased a 42k increase in May. Government fell by 53k, mostly on a 50k decline in local government education work.  

We expect Canadian employment to increase by 20k in August, a moderate gain to follow a very strong 75.1k in July, similar to the moderate 18.2k increase in June that followed a very strong rise of 87.8k in May. We expect unemployment to hold at 6.4%, after three straight declines. This would be consistent with an economy continuing a recent return to growth after a pause initiated in Q2 2025 by US tariffs. We expect the job gain to be led by a 15k rise in full time work, with part time up by 5k.

Manufacturing and construction both saw strong gains in May and July with dips in June. For August we expect a 5k dip in manufacturing and flat construction, with overall goods employment falling by 10k with mining also slipping. We expect services to rise by 30k, respectable but down from gains exceeding 60k in June and July, and close to 50k in May. The service detail is likely to be broadly modestly positive. The public sector may produce an above trend month after slippage in June and July, though this may be balanced by a correction from a strong July in self-employment. We expect a 20k rise in private sector employment,  respectable but like services a four month low.

The Japan Overal Household Spending has been poor for the past quarter and yet to return to expansion desptie real wage turning more positive. It will be concerning for the BoJ, given domestic demand is one of the strongest pillar for japanese economics growth. The figure should see normalization once Japanese residents acknowledge the wage/price dynamics are persisting. A positive read woulld be supportive for BoJ's September hike.

On the chart, the rejection from the 160.00/50 resistance has seen sharp losses through 159.00 level before stabilizing at the 158.50/00 congestion area. Daily studies have turned down to unwind overbought readings and suggest strong gains from the August low now being retraced with consolidation at the 158.50/00 area expected to give way to fresh selling pressure later. Lower will open up room for deeper pullback to support at 157.00/156.65 area. Meanwhile, resistance is lowered to the 159.00/159.50 congestion area which is expected to cap and sustain losses from the 160.00/160.50 resistance.