Japanese Yen Forecast: USD/JPY Eyes Sub-139.500 as BoJ Rate Hike Hopes Rise

Tertiary Activity Index and the Bank of Japan Rate Path

Japan’s Tertiary Industry Activity Index will spotlight the USD/JPY pair on Tuesday, September 17.

Economists forecast that the Tertiary Industry Activity Index will increase by 1% in August after falling by 1.3% in July.

The Index is important since it measures activity levels in Japan’s services sector across areas, including wholesale and retail trade, finance, insurance, real estate, transportation, information and communications, and personal and business services.

Better-than-expected numbers could signal a pickup in service sector activity, which accounts for over 70% of GDP. Upbeat trends could fuel expectations of a Q4 2024 Bank of Japan rate hike.

Considering the Bank of Japan’s focus on the services sector, higher-than-forecasted figures could push the USD/JPY below 139.500.

On Thursday, September 12, Bank of Japan Board Member Tamura supported comments from other Board Members, reiterating that the future rate path will depend on inflation and the economy.

Expert Views on the Bank of Japan’s Monetary Policy Outlook

Boris Kovacevic, Global Macro Strategist at Convera, recently remarked on the Bank of Japan’s shifting stance, stating,

“Bank of Japan officials continue to uphold their hawkish bias, fueling the narrative of a potential rate hike coming before year end. This expected policy normalization coupled with US yields falling to 17-month lows have dragged USD/JPY to a new 2024 low point at 140.50¥. The Japanese yen is currently tearing through FX markets, having appreciated against 98% of the world’s currencies since the beginning of the second half of 2024.”

US Retail Sales and Economic Outlook

In addition to Japan’s data, US retail sales later in the session on Tuesday could also influence USD/JPY movements.

Economists expect retail sales will increase by 0.2% in August, down from a 1.0% rise in July.

Accounting for 60% of GDP, better-than-expected figures may boost expectations of a soft US economic landing and strengthen the US dollar. A pickup in consumer spending could push the US dollar toward 142 ahead of Wednesday’s Fed interest rate decision. Easing fears of a hard US economic landing may temper expectations of aggressive Fed rate cuts to support the US economy.

Short-term Forecast for USD/JPY

USD/JPY trends will likely depend on Bank of Japan commentary and Wednesday’s Fed interest rate decision. Hawkish comments from the BoJ and a more dovish-than-expected Fed rate path may drag the USD/JPY below 139.500.

However, investors should also consider key economic indicators from Japan and the US that could fuel USD/JPY volatility.

Investors should remain alert with Wednesday’s Fed interest rate decision looming. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY remains well below the 50-day and 200-day EMAs, affirming bearish price signals.

A USD/JPY break above the 141.032 resistance level could support a move toward the 142.500 level. Furthermore, a USD/JPY return to the 142.500 level may give the bulls a run at the 143.495 resistance level.

Japan’s Tertiary Industry Activity Index, Bank of Japan commentary, and US retail sales numbers require consideration.

Conversely, a drop below the September 16 low of 139.576 could bring the 137.712 support level into play.

The 14-day RSI at 31.12 suggests a USD/JPY drop below 140 before entering oversold territory.