Japanese Yen Forecast: USD/JPY Faces Volatility Amid BoJ Rate Hike Bets and US Data

Industrial Production in Focus Amid Shifting BoJ Rate Hike Expectations

Industrial production figures from Japan will spotlight the USD/JPY on Tuesday, October 15. According to the preliminary report, industrial production tumbled by 3.3% year-on-year in August, reversing a 3.3% jump in July. A downward revision could reduce investor expectations for a late Q4 2024 Bank of Japan rate hike.

A sustained decline in industrial production may affect Japan’s labor market. The manufacturing sector accounts for around 15% of the total workforce. Weaker demand for manufacturing could limit wage growth, possibly dampening consumer spending and inflation.

While the Bank of Japan’s focus remains on the services sector, manufacturing inputs can influence sentiment toward the economy. Weaker-than-expected industrial production could push the USD/JPY toward 151. Conversely, a sharp upward revision may drive the USD/JPY pair below 149.

Expert Views on the Bank of Japan Rate Path

On Thursday, October 10, Bank of Japan Deputy Governor Ryozo Himino stated the BoJ would raise interest rates further if the economy aligns with their projections. His comments suggest greater Japanese Yen sensitivity to incoming economic data.

On Monday, October 14, the BBC covered news of Japan’s Prime Minister Shigeru Ishiba assuring the markets he would not intervene in BoJ monetary policy. Confidence in the BoJ’s independence will be crucial in the coming months.

US Consumer Inflation Expectations and the Fed Rate Path

In the US, consumer inflation expectations and the NY Empire Manufacturing Index may also influence USD/JPY trends.

Following September’s inflation data, consumer inflation expectations could have a greater impact on the USD/JPY. Economists forecast consumer inflation expectations to fall slightly from 3.0% in August to 2.9% in September. Lower expectations may delay purchases, affecting inflation.

A larger-than-expected decline in expectations could raise expectations of multiple Q4 2024 Fed rate hikes, possibly pulling the USD/JPY below 149. Conversely, an unexpected rise could fuel consumer spending and inflation, reducing bets on November and December Fed rate cuts. A more hawkish Fed rate path may drive the USD/JPY toward 151.

Short-term Forecast for USD/JPY

USD/JPY trends will likely depend on this week’s trade and inflation data from Japan. Weaker trends could reduce expectations of a Q4 2024 BoJ rate hike. Delays to a BoJ rate hike could further impact Japanese Yen demand. However, US retail sales and jobless claims will influence sentiment toward the Fed rate path and US dollar demand.

Traders should stay alert as monetary policy chatter, Japan’s economic data, and the US economic indicators, which will affect 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 holds above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY return to 150 could signal a move toward the 151.685 resistance level and the trend line. Furthermore, a break above the 200-day EMA could support a move toward the trend line and the 151.685 resistance level. Selling pressure may increase at the resistance level. The trend line is confluent with the 151.685 resistance level.

Japan’s industrial production, US consumer inflation expectations, and central bank commentary require close monitoring.

Conversely, a drop below the 200-day EMA could bring the 148.529 support level into play. A fall through the 148.529 support level may signal a fall toward 147.5.

The 14-day RSI at 65.37 indicates a USD/JPY move to 151.685 resistance level before reaching overbought territory.