Japanese Yen Forecast: USD/JPY Eyes 150 as US CPI Data and BoJ Rate Path Loom

Producer Prices to Influence BoJ Rate Path

Producer prices from Japan will likely impact demand for the USD/JPY. Economists forecast producer prices will increase by 2.3% year-on-year in September, down from 2.5% in August.

Softer producer prices could indicate weakening consumer price trends as producers lower prices in response to reduced demand. Lower producer prices could dampen inflation expectations, possibly tempering investor bets on a Q4 2024 Bank of Japan rate hike. A less hawkish BoJ rate path may drive the USD/JPY toward 150.

BoJ and Interest Rates

Japan’s new prime minister, Shigeru Ishiba, recently sank bets on a Q4 2024 BoJ rate hike, saying the nation was not ready for further rate hikes. However, the BoJ’s independence remains intact despite Prime Minister Ishiba’s comments.

A former monetary policy executive has reportedly stated that the Prime Minister will not interfere with the Bank of Japan’s monetary policy plans. The former policymaker also predicted a possible January rate hike.

In July, the BoJ raised interest rates and cut Japanese government bond purchases (JGB). BoJ Governor Kazuo Ueda warned of more rate hikes, sparking a ‘Yen carry trade unwind.’ The resulting market disruption led to lawmakers questioning the BoJ’s strategy. The BoJ responded to the market disruption, assuring no further rate hikes were imminent.

Increased speculation of a BoJ rate hike could push the USD/JPY toward 147.500. However, inflation, wage growth, and services sector data need to support the case for further policy tightening.

US CPI Report Crucial for the Fed Rate Path

Later in the Thursday session, the highly anticipated US CPI Report will likely impact US dollar demand. Economists forecast the annual inflation rate to fall from 2.5% in August to 2.3% in September.

Softer-than-expected inflation could fuel speculation about a 25-basis point November Fed rate cut. However, a drop below the Fed’s 2% target could reignite bets on a 50-basis point rate cut.

A softer-than-expected inflation print could send the USD/JPY below 147.5. Conversely, hotter-than-expected inflation could reduce bets on a November Fed rate cut, possibly pushing the USD/JPY toward 150.

Other economic data include the weekly jobless claims. However, unless claims deviate significantly from 225k, the figures will likely play second fiddle to the CPI Report.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on inflation numbers from Japan and the US and central bank commentary. Softer inflation figures from Japan could dampen bets on a Q4 2024 BoJ rate hike. However, a lower-than-expected US inflation rate could raise expectations of a 50-basis point Fed rate cut.

A more dovish Fed rate path may narrow the interest rate differential between the US and Japan, impacting US dollar demand.

Traders should stay alert as monetary policy chatter, Japan’s economic data, and the US CPI Report will impact trading USD/JPY strategies. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY remains comfortably above the 50-day EMA while hovering below the 200-day EMA, affirming bullish near-term but bearish longer-term price signals.

A USD/JPY break above the 200-day EMA could give the bulls a run at 150. Furthermore, a breakout from 150 may signal a move toward the trend line and the 151.685 resistance level.

Inflation figures and central bank commentary require consideration.

Conversely, a break below the 148.529 support level could indicate a drop toward 147.500. A fall through 147.500 may bring the 50-day EMA and the 145.891 support level into play.

The 14-day RSI at 65.28 indicates a USD/JPY move to the 200-day EMA before entering overbought territory.