Japanese Yen Forecast: Will USD/JPY Break 147.5 Amid BoJ Rate Hike Speculation?

Machinery Tool Orders to Reflect Demand Environment

On Wednesday, October 9, machine tool orders will shift the focus to the USD/JPY and the Japanese economy. Economists expect orders to decline by 1.2% year-on-year in September, up from August’s 3.5% decline. Better-than-expected orders may signal improving demand, potentially supporting the Japanese economy.

Upward trends in orders could boost job creation across the manufacturing sector. A tighter labor market may support wage growth, drive consumer spending, and contribute to demand-driven inflation. Household spending jumped by 2% in August, reversing July’s 1.7% drop.

Rising consumer spending and inflation could increase expectations of a Q4 2024 Bank of Japan rate hike. A more hawkish BoJ rate path may lead to a USD/JPY drop toward 147.5.

BoJ and Interest Rates

Japan’s new prime minister, Shigeru Ishiba, recently poured cold water on expectations of a Q4 2024 BoJ rate hike, saying the country was not ready for further rate hikes. However, the BoJ’s latest regional quarterly report suggested a Q4 2024 rate hike remains possible.

The report showed improvement across all nine regions, although some reported weakness in part. Hokuriku and Tokai reported improving economic recoveries, while Kanto and Kinki, among Japan’s main regional contributors to GDP, reported moderate economic recoveries. A sustained recovery would likely boost expectations of a Q4 2024 BoJ rate hike.

Amidst shifting sentiment toward the BoJ rate path, investors should monitor BoJ Board Member speeches. Their insights could influence demand for the Yen and sentiment toward the BoJ rate path. While the Japanese government may comment on monetary policy, the BoJ remains independent.

Overview of the US Economic Calendar: FOMC Minutes and Fed Speakers in Focus

In the US session, the Fed will be under the spotlight. The FOMC Meeting Minutes from September will draw interest. The minutes will offer insights into the economic outlook and interest rate path, though the recent US Jobs Report could limit the impact on the USD/JPY.

Investors should also monitor FOMC member speeches. FOMC members Thomas Barkin, Austan Goolsbee, Philip Jefferson, and Fed Vice Chair John Williams are on the calendar to speak. Their reactions to the US Jobs Report and views on the timeline for a Fed rate cut could impact US dollar demand. Calls to delay rate cuts may push the USD/JPY toward 150.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on central bank commentary and Thursday’s US CPI Report. A hotter-than-expected US CPI Report could reduce expectations of multiple Q4 2024 Fed rate cuts, potentially driving the USD/JPY toward 150. However, Japan’s producer prices (Thurs) and Reuters Tankan Index (Fri) will influence sentiment toward the BoJ rate path.

Traders should stay alert as monetary policy chatter, Japan’s economic data, and the US CPI Report will impact 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 hovers well above the 50-day EMA while remaining below the 200-day EMA, confirming bullish near-term but bearish longer-term price trends.

A USD/JPY break above the 148.529 resistance level could signal a move toward the 200-day EMA. Furthermore, a breakout from the 200-day EMA may bring the trend line and the 151.685 resistance level into play.

Japan’s machine tool orders, the FOMC Meeting Minutes, and central bank commentary require consideration.

Conversely, a fall through 147.500 could bring the 50-day EMA and the 145.891 support level into play.

The 14-day RSI at 62.53 suggests a USD/JPY climb to the 200-day EMA before entering overbought territory.