Japanese Yen Forecast: Will USD/JPY Break 140? Japan’s Production Data Holds the Key

Japan’s Industrial Production in Focus

On Friday, September 13, finalized industrial production figures from Japan could influence buyer demand for the USD/JPY pair.

According to the preliminary report, industrial production increased by 2.8% in July after falling by 4.2% in June. Upward revisions may signal improving demand in manufacturing, possibly supporting the Japanese economy as it accounts for over 20% of GDP.

A pickup in production could drive job creation and wage growth, boosting household spending and demand-driven inflation. A higher inflation outlook will likely raise expectations of a Q4 2024 Bank of Japan rate hike, possibly pushing the USD/JPY down toward 140.

Expert Views on Japan’s Manufacturing Sector

S&P Global Markets Intelligence Economist Usamah Bhatti recently commented on the Jibun Bank Manufacturing PMI survey, stating,

“The headline reading came close to stabilisation during August amid a renewed rise in production and a softer fall in new order intakes. Firms also mentioned taking on additional staff while destocking efforts appeared to ease. There were also indications of improved supplier performance as manufacturers mentioned more readily available inputs, particularly electrical components.”

Bank of Japan Forward Guidance Remains Hawkish

On Thursday, September 12, Bank of Japan Board Member Tamura echoed Board Member comments from earlier this week, stating that the future rate path will depend on inflation and the economy. More hawkish commentary could support a USD/JPY drop toward 140.

US Economic Data Pivotal to USD/JPY Trends

Later on Friday, preliminary Michigan Consumer Sentiment figures will be in focus.

Economists predict the Michigan Consumer Sentiment Index will increase from 67.9 in August to 68.0 in September. Higher consumer confidence could drive spending and fuel inflation. Furthermore, upward inflation trends may dampen expectations of November and December Fed rate cuts, possibly pushing the USD/JPY toward 143.

However, investors should also consider inflation expectations. Consumers could delay purchases if they expect consumer prices will decline, which could weaken demand-driven inflation.

Economists forecast the Michigan Inflation Expectations Index to remain steady at 2.8%.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on the Michigan numbers. Upward trends in the Michigan data could temper bets on Q4 2024 Fed rate cuts, possibly pushing the USD/JPY toward 143. However, investors should also consider Bank of Japan commentary and support for Q4 rate hikes.

Investors should remain alert. US consumer sentiment and central bank chatter will likely influence the BoJ and the Fed’s rate paths. 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 Price Action

Daily Chart

The USD/JPY hovered below the 50-day and 200-day EMAs, confirming bearish price trends.

A USD/JPY breakout from the 142.500 level could indicate a move toward the 143.495 resistance level. Furthermore, a break above the 143.495 resistance level may give the bulls a run at 145 and the 145.891 resistance level.

Bank of Japan commentary and the Michigan Consumer Sentiment numbers require consideration.

Conversely, a break below the 141.032 support level and the September 11 low of 140.706 could indicate a fall through 140.

The 14-day RSI at 31.52 indicates a USD/JPY break below the 141.032 support level before entering oversold territory.