Japanese Yen Forecast: Will USD/JPY Break 150? BoJ Rate Hike Speculation Eases

On Monday, October 7, the USD/JPY will be under the spotlight, with the Conference Board Leading Economic Index (LEI) in focus. Economists expect the LEI to drop from 109.3 in July to 107.4 in August. Will a lower LEI further soften BoJ rate hike expectations?

A drop in the LEI could signal a softer outlook for the Japanese economy. The LEI reflects key economic indicators, including business and consumer sentiment. A weaker economic outlook could reduce investor expectations of a Q4 2024 Bank of Japan rate hike, supporting a USD/JPY move toward 150.

Other economic data, including the Coincident Economic Index, could provide insights into the current economic environment. However, the economic outlook will likely have a greater impact on the USD/JPY amidst shifting sentiment toward the BoJ rate path.

Japan’s Government and BoJ Curb Bets on a Q4 2024 BoJ Rate Hike

In recent speeches, the government and the BoJ have reduced market expectations for a Q4 2024 rate hike.

Japan’s new prime minister, Shigeru Ishiba, recently said that the country is not ready for further rate hikes.

On Thursday, BoJ board member Noguchi offered a similar view on interest rates, reportedly saying,

“I personally feel we need to proceed very carefully in adjusting our degree of monetary support.”

US Economic Calendar: FOMC Members in Focus

Later in the Monday session, investors should consider FOMC member speeches following Friday’s US Jobs Report.

Tighter labor market conditions crashed investor expectations of a 50-basis point November Fed rate cut. FOMC Members’ support for a 50-basis point November rate cut could send the USD/JPY toward 147.5. Conversely, if members call for a delay to Fed rate cuts, the USD/JPY could approach 150.

A delay in Fed rate cuts may lower expectations of a narrowing in the interest rate differential between the US and Japan.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on crucial economic indicators from Japan, including household spending (Tues) and wage growth trends (Tues). Upward trends in wages and household spending could fuel demand-driven inflation, boosting bets on a Q4 2024 BoJ rate hike.

However, FOMC member commentary and Thursday’s US CPI Report will likely influence the Fed rate path. A softer-than-expected US inflation rate may retrigger bets on aggressive Fed rate cuts. Conversely, a hotter-than-expected CPI print could reduce bets on multiple 2024 Fed rate cuts, possibly pushing the USD/JPY through 150.

Traders should stay vigilant as monetary policy chatter and Japan’s economic data could 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 EMA while remaining below the 200-day EMA, confirming bullish near-term but bearish longer-term price trends.

A USD/JPY break above the 200-day EMA would support a return to 150. Furthermore, a breakout from 150 could give the bulls a run at the trend line and the 151.685 resistance level.

Japan’s LEI Index trends and monetary policy commentary require consideration.

Conversely, a break below the 148.529 support level could bring the 50-day EMA and the 145.891 support level into play.

The 14-day RSI at 65.41 suggests a USD/JPY climb to the 200-day EMA before entering overbought territory.