Japanese Yen Weekly Forecast: Will the USD/JPY Dip Below 153.5 on BoJ Rate Hike Bets

USD/JPY Advances for a Second Week

Will Japan’s Economic Revival Trigger a Yen Surge? Here’s What Traders Need to Know About USD/JPY This Week. The pair advanced by 0.28% to 154.707 in the week ending November 22. On November 19, the pair dropped to a low of 153.272 before climbing to a high of 155.884 on November 20.

Japan’s Leading Economic Index and the Bank of Japan in Focus

On Monday, November 25, Japan’s Conference Board Leading Economic Index (LEI) will spotlight the USD/JPY. Economists forecast the LEI to rise from 106.9 in August to 109.4 in September. Could the LEI drive speculation about a December Bank of Japan rate hike?

A higher LEI may signal economic improvement as the Index considers consumer and business sentiment indicators.

A higher-than-expected LEI may boost bets on a December BoJ rate hike following Japan’s recent Services PMI and inflation figures. A more hawkish BoJ rate path may pull the USD/JPY to 153.5.

Additionally, the Coincident Economic Index will give insights into the current macroeconomic environment.

Inflation, Labor Market, and Retail Sales Crucial to the BoJ Rate Path

Japan’s inflation, retail sales, and labor market data, on Friday, November 29, will likely impact sentiment toward a December BoJ rate hike.

Economists forecast Tokyo’s core inflation rate to rise from 1.8% in October to 2.1% in November, above the BoJ’s 2% target. An increase above the BoJ target could increase speculation about a December BoJ rate hike.

Furthermore, Japan’s labor market also needs consideration. Economists expect Japan’s unemployment rate to increase from 2.4% in September to 2.5% in October. A higher unemployment rate could soften wage growth, potentially dampening consumer spending and demand-driven inflation.

Looser labor market conditions may lower bets on a December BoJ rate hike, weakening demand for the Japanese Yen. Conversely, steady labor market conditions could increase expectations for a December hike.

Finally, economists predict retail sales will increase by 0.7% year-on-year in October, up from 0.5% in September. Retail sales could spur demand-driven inflation, potentially raising bets on a December BoJ rate hike. Conversely, weaker sales may dampen bets on a December hike, impacting the appetite for the Japanese Yen.

For the USD/JPY pair, rising bets on a December BoJ rate hike may signal a drop below 153.5. However, falling expectations for a December hike could drive the USD/JPY toward 156.

Expert Views on the Bank of Japan Rate Path

In the November 13-21 Reuters poll, 56% of economists predicted the BoJ would raise interest rates in December, up from 49% in the October poll. Economists were more hawkish on the weaker Japanese Yen, reducing downside risks to the global economy, and Japan’s economic data and prices aligning with the BoJ’s forecasts.

US Economic Calendar: Fed Rate Path in Focus

On Tuesday, November 26, economists forecast the CB Consumer Confidence Index to jump from 108.7 in October to 112.0 in November. Upward trends in consumer confidence may signal a pickup in consumer spending, potentially fueling inflationary pressures.

Investors could reduce bets on a December Fed rate cut, driving US dollar demand. Conversely, an unexpected fall in confidence may raise expectations of a rate cut, lowering US dollar demand.

On Wednesday, November 27, the all-important US Personal Income and Outlays Report could influence the Fed rate path. Economists forecast the Core PCE Price Index to increase by 2.7% year-on-year in October, mirroring September’s trends.

A higher Core PCE Price Index would lower expectations of a Fed rate cut, increasing US dollar demand. However, an unexpected fall in inflation could refuel bets on a Fed rate cut.

While the Core PCE Price Index will be crucial for the Fed, personal income and spending trends also need consideration. Rising personal income and spending could fuel demand-driven inflation, signaling a higher inflation outlook.

On Wednesday, other US economic indicators include GDP, jobless claims, and durable goods orders. However, unless there is an unexpected spike in claims or marked revision to the GDP numbers, the data will play second fiddle to the Personal Income and Outlays Report.

Better-than-expected US economic indicators and dampening bets on a December Fed rate cut could drive the USD/JPY through 156. Conversely, rising expectations for a Fed rate cut expectations may pull the USD/JPY below 153.5.

Short-term Forecast:

Near-term USD/JPY trends will hinge on crucial economic data from Japan, the US Personal Income and Outlays Report, and central bank forward guidance. Rising bets on a December BoJ rate hike and Fed rate cut could drag the USD/JPY below 153.5. On the other hand, expectations for the BoJ and the Fed standing pat in December might push the pair through 156.

Investors should stay alert, monitoring real-time data, central bank views, and expert commentary to adjust trading strategies accordingly. Stay informed with our latest analysis and news to navigate the FX markets.

USD/JPY Price Action

Daily Chart

The USD/JPY sits comfortably above the 50-day and 200-day EMAs, affirming bullish price signals.

A USD/JPY return to the November 20 high of 155.884 could signal a move to the November 15 high of 156.744. A break above 156.744 may allow the bulls to target 157.5, previously reached before the BoJ’s July rate hike.

Investors should consider the economic indicators and central bank commentary, potentially affecting USD/JPY price trends.

Conversely, a fall below the trend line and 153.5 could bring the 151.685 support level into play. A break below the 151.685 support level may enable the bears to target the 50-day and 200-day EMAs.

The 14-day RSI at 58.29 suggests a USD/JPY move through 156.744 before entering overbought territory.