Japanese Yen Forecast: Will USD/JPY Break 140 on BoJ Meeting Minutes and Inflation Data?

BoJ’s Unexpected Moves and the Yen’s Volatility

Will the Bank of Japan’s next move trigger another shockwave in the USD/JPY markets? Investors are on edge as key monetary policy minutes loom. The second half of the week could be pivotal for the USD/JPY pair.

On Thursday, September 26, the Bank of Japan’s (BoJ) monetary policy meeting minutes will draw significant interest. While the minutes are for the July 30-31 meeting, they could reveal the BoJ’s thought process behind the July rate hike, the interest rate trajectory, and the possible impact on the global financial markets.

The BoJ unexpectedly raised interest rates and reduced Japanese Government Bond (JGB) purchases, while BoJ Governor Kazuo Ueda signaled more rate hikes. The USD/JPY tumbled from a July 31 opening price of 152.748 to an August 5 low of 141.684, fueling a ‘Yen carry trade unwind.’

The minutes may also reveal the conditions needed for further interest rate hikes. Since the ‘Yen carry trade unwind,’ the Bank of Japan has downplayed further rate hikes despite the building of headline inflationary pressures. Japan’s annual inflation rate increased from 2.8% in July to 3.0% in August.

Inflation Pressures and the Rate Path Outlook

Despite the rise in headline inflation, BoJ Governor Ueda remains focused on underlying inflation. On Tuesday, September 24, the BoJ Governor suggested that there was no immediate need for further rate hikes, stating,

“October is a month when service price revisions are concentrated in Japan, so we must scrutinize data carefully.”

Notably, Governor Ueda’s comments suggest that Friday’s inflation figures for Tokyo are unlikely to influence the BoJ rate path. Economists expect the Bank of Japan to consider raising interest rates in December, at the earliest.

However, despite the Bank of Japan’s current monetary policy stance, the outlook remains bearish for the USD/JPY, with sub-140 eyed.

Expert Views on the Bank of Japan Rate Path

According to a recent CNBC International survey, 56.25% of those polled expect the BoJ to leave rates unchanged in October, with 43.75% predicting a hold in December. All 32 analysts predicted that the BoJ would hold rates unchanged last Friday.

Will US Housing Data Impact the USD/JPY?

Later in the Wednesday session, new home sales will garner investor interest. Economists expect new home sales to slide by 5.1% in August after a 10.6% surge in July. A larger-than-expected decline may fuel concerns about the US economy.

Economists consider the US housing market a litmus test of the economy. Deteriorating housing market conditions may impact consumer confidence, private consumption, and the economy. A more marked decline in new home sales may push the USD/JPY pair toward the 142.5 level.

Short-term Forecast for USD/JPY

USD/JPY trends will hinge on central bank commentary and Friday’s Personal Income and Outlays Report. Dovish Fed comments, softer inflation, and weaker-than-expected personal income/spending may reignite concerns of a hard landing. Speculation about a US economic recession may drive Yen demand.

Investors should remain alert, with economic indicators and central bank commentary to dictate demand for the USD/JPY pair. 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 hovers well below the 50-day and 200-day EMAs, confirming bearish price trends.

A USD/JPY break above the 143.495 resistance level could support a move toward 145. Furthermore, a return to 145 may give the bulls a run at the 145.891 resistance level.

Bank of Japan commentary, US new home sales, and Fed chatter require consideration.

Conversely, a fall through 142.5 could bring the 141.032 support level into play.

The 14-day RSI at 44.10 suggests a USD/JPY drop to the 141.032 support level before entering oversold territory.