Japanese Yen Forecast: Will USD/JPY Break 142 as BoJ and US Labor Data Loom?

Bank of Japan Monetary Policy Meetings in Focus

The USD/JPY pair will be in the spotlight on Thursday, September 26, with the Bank of Japan’s July monetary policy meeting minutes in focus.

On July 31, the Bank of Japan unexpectedly raised interest rates to 0.25% while reducing Japanese Government Bond (JGB) purchases. BoJ Governor Kazuo Ueda hinted at more rate hikes during the press conference.

The July monetary policy decision coincided with a marked shift in sentiment toward the Fed rate path, leading to a ‘Yen carry trade unwind.’ The USD/JPY dropped from a July 31 opening price of 152.748 to an August 5 low of 141.684, impacting the global financial markets, including crypto.

XRP, for instance, tumbled 25.7% during the same period, reflecting the widespread impact of the ‘Yen carry trade unwind.’

While the minutes are dated, considering the BoJ’s September monetary policy decision, they may give insights into the BoJ’s stance on interest rates, the Fed rate path, and market disruption.

The USD/JPY and the global markets could be exposed to another Yen carry trade unwind if the BoJ focuses more on price stability than the Fed rate path and market conditions.

Bank of Japan Willing and Able to Raise Rates

Since July, BoJ Board members have suggested a willingness to raise rates higher if inflation and the economy align with forecasts. However, BoJ Governor Ueda recently downplayed any urgency to lift rates. Nevertheless, hawkish minutes would align with recent Board Member’s insights, possibly supporting a USD/JPY move toward 142.

Recent inflation figures have fueled speculation about a Q4 2024 BoJ rate hike. In reaction to August’s national inflation figures, PGIM Alternatives CIO Aniruddha Naha stated,

“Japan’s core CPI index climbed 2.8% year on year, in line with estimates, versus a 2.7% rise in the previous month. With inflation inching higher, likelihood of an interest rate hike in Japan. Interesting times, as US has cut rates. The Yen carry trade unwinding is on.”

US Labor Market Under the Spotlight

Later in the Thursday session, US initial jobless claims will draw investor interest. Economists predict initial jobless claims will increase from 219k (week ending September 14) to 225k (week ending September 21).

An unexpected spike above 250k may reignite fears of a hard US economic landing, possibly pushing the USD/JPY toward 142. Conversely, claims below 230k may boost hopes of a soft landing and a USD/JPY move toward 145.5.

Other stats include finalized GDP and durable goods order figures. However, the labor market data could have a greater influence on the Fed rate path. Beyond the numbers, Fed Chair Powell is on the calendar to speak.

Short-term Forecast for USD/JPY

USD/JPY trends will hinge on the Bank of Japan’s monetary policy meeting minutes, US jobless claims, and central bank speeches. A hawkish BoJ and an unexpected spike in US jobless claims could signal a further narrowing in the interest rate differential. However, upcoming inflation figures from Japan and the US could significantly influence the USD/JPY pair.

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 remains below the 50-day and 200-day EMAs, affirming bearish price signals.

A USD/JPY return to 145 would support a move toward the 145.891 resistance level. Furthermore, a breakout from the 145.891 resistance level could bring the 50-day EMA into play.

The BoJ minutes, central bank commentary, and the US economic calendar require consideration.

Conversely, a break below the 143.495 support level could give the bears a run at 142.5. A fall through 142.5 may signal a drop toward the 141.032 support level.

The 14-day RSI at 52.22 indicates a USD/JPY return to 147.5 before entering overbought territory.