Japanese Yen Forecast: Will USD/JPY Fall on Soft Japan Services PMI and BoJ Guidance?

Japan’s Services Sector PMI Pivotal for BoJ Rate Path

Private sector PMIs from Japan will influence buyer demand for the USD/JPY pair and the Bank of Japan rate path on Tuesday, September 24.

Economists forecast that the crucial Jibun Bank Services PMI will fall slightly from 54.0 in August to 53.8 in September. A larger-than-expected decline could reduce investor bets on a Q4 2024 Bank of Japan rate hike.

The services sector contributes over 70% to the Japanese economy and is a focal point for the BoJ, which is eyeing the services sector to fuel demand-driven inflation. With the services sector under scrutiny, investors should consider subcomponents, including employment and prices. Weaker job creation and input price trends would align with the BoJ’s monetary policy stance.

On Friday, the Bank of Japan left interest rates unchanged and gave no hints of further rate hikes.

A softer Services PMI, with downward trends in job creation and input prices, could push the USD/JPY toward 145.

Later in the Tuesday morning session, Bank of Japan Governor Kazuo Ueda is on the calendar to speak. His insights into inflation and the timing for a BoJ rate hike could move the dial. Investors should consider deviation from Friday’s comments, with the USD/JPY highly sensitive to the Bank of Japan’s forward guidance.

Bank of Japan Policy Guidance and Expert Views

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 steady last Friday.

US Consumer Confidence in Focus

Later in the Tuesday session, US consumer confidence figures will also require consideration. Economists forecast the CB Consumer Confidence Index to fall from 103.3 in August to 102.9 in September.

Downward trends in consumer confidence could signal reduced spending, supporting a more dovish Fed rate path. Increasing expectations of multiple 2024 Fed rate cuts could push the USD/JPY below 142.5. However, fears of a US hard economic landing could intensify if the Index falls below 100, possibly fueling a flight to safety. Private consumption contributes over 60% to the US economy.

Short-term Forecast for USD/JPY

USD/JPY trends will depend on the services PMI from Japan, US consumer confidence figures, and central bank commentary. Weaker-than-expected PMI numbers and cautious comments from the BoJ Governor could impact Yen demand. Moreover, a modest decline in US consumer confidence may bolster expectations of a soft US landing, supporting a USD/JPY move toward 145.

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 well 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 break above the 145.891 resistance level could give the bulls a run at the 50-day EMA.

Services sector PMI figures from Japan, consumer confidence numbers from the US, and central bank commentary require consideration.

Conversely, a fall through the 143.495 support level could signal a drop toward the 141.032 support level.

The 14-day RSI at 46.36 indicates a USD/JPY fall to the 141.032 support level before entering oversold territory.