Japanese Yen Weekly Forecast: Will USD/JPY Drop to 150 on BoJ’s December Rate Clues?

USD/JPY Ends Five-Week Winning Streak

The USD/JPY declined by 0.23% to 152.568 in the week ending November 8, ending a five-week winning streak. On Wednesday, the USDJPY fell to a low of 151.276 before rebounding briefly to a Thursday high of 154.708.

Bank of Japan Summary of Opinions Spotlights the Japanese Yen

Upcoming events for the week starting November 11 include the Bank of Japan Summary of Opinions. On October 31, the Bank of Japan maintained its interest rate at 0.25%. However, despite political uncertainty following Japan’s general election, the BoJ left the door open to further rate hikes.

The Summary of Opinions will provide insights on conditions that might justify a December rate hike.

Machine Tool Orders to Indicate Demand Trends

Machine tool orders will draw interest on Tuesday, November, 12. Economists expect machine tool orders to decline by 3.7% year-on-year in October after falling 6.5% in September.

Improving demand might signal a stronger labor market and boost consumer confidence. Upward consumer confidence may drive consumption and inflation trends, potentially raising bets on a December BoJ rate hike.

Producer Prices and the BoJ Rate Path

On Wednesday, November 13, the focus will shift to Japan’s producer prices. Economists expect producer prices to increase by 3.0% year-on-year in October, up from 2.8% in September.

Upward trends in producer prices might signal increased demand, potentially driving inflation higher. Producer prices are a leading indicator for inflation since producers adjust prices as demand shifts, passing higher costs or savings to consumers.

Will the BoJ’s stance impact the Yen’s strength in December?

A hawkish Summary of Opinions and improving demand might drag the USD/JPY toward 150 on expectations for a December BoJ rate hike. Conversely, a cautious Summary of Opinions and weaker demand could drive the USD/JPY toward 155.

Private Consumption and GDP: Crucial for December Rate Hike Expectations

On Friday, November 15, Japan’s quarterly GDP report will require consideration. Economists expect the economy to expand by 0.2% quarter-on-quarter in Q3, down from 0.8% in Q2 2024. Private consumption trends will also be crucial as it accounts for around 60% of GDP.

An unexpected contraction will likely lower bets on a December BoJ rate hike, while stronger growth could fuel speculation about a December rate hike.

A less hawkish BoJ rate path could support a USD/JPY move toward 155. Conversely, expectations for a December rate hike may potentially pull the pair toward 150.

BoJ Concerns Over a Weak Yen

While the data will influence sentiment toward the BoJ rate path, USD/JPY also need consideration. The BoJ remains concerned about the effects of a weak Yen on households. In June, Deputy Governor Ryozo Himino noted concerns, saying,

“Exchange-rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices.”

Since June, the global markets experienced the Yen carry trade unwind and Trump’s victory in the US presidential election. In response to these events, the USD/JPY tumbled below 140 in September before climbing to last week’s high of 154.708.

Expert Views on the Bank of Japan Rate Path

ING Senior Economist for South Korea and Japan Min Joo Kang commented on the BoJ’s possible interest rate trajectory, stating,

“Between now and the BoJ’s December meeting, US data, Tokyo’s November inflation, and labour cash earnings will be closely watched. But, the most dominant factor in the BoJ’s December move is likely to be FX. Even if the BoJ decides to extend its pause in December, we continue to believe that the BoJ will hike rates by 25bp each quarter until it reaches 1.0%.”

US Economic Calendar: The CPI Report, Labor Market Data, and Retail Sales in Focus

On Wednesday, the crucial CPI Report will likely influence the Fed rate path. Economists forecast the core inflation rate will remain at 3.3% in October.

Higher-than-expected inflation could sink investor bets on a December Fed rate cut, supporting a USD/JPY move toward 155. Conversely, falling below 3% might drive December Fed rate cut expectations, potentially dragging the pair toward 150.

Initial jobless claims, on Thursday, also need consideration. A spike in jobless claims could boost December Fed rate cut bets. However, tighter labor market conditions might signal a pickup in wages and consumer spending. Upward trends in consumer spending may push inflation higher, delaying the timeline for a Fed rate cut.

On Friday, November 15, retail sales figures are also significant. Economists expect retail sales to increase by 0.3% in October after rising 0.4% in September. Higher retail sales might signal a sticky inflation environment, supporting a less dovish Fed rate path.

Short-term Forecast:

Near-term USD/JPY trends will hinge on BoJ forward guidance, Japan’s economic data, and crucial US economic indicators. Rising bets on a December BoJ rate hike and Fed rate cut could pull the USD/JPY down to 150. Conversely, expectations for the BoJ and the Fed to stand pat in December may drive the pair toward 155.

Investors should stay vigilant, 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 break above the trend line could support a return to last week’s high of 154.708. Furthermore, a breakout from 154.708 may enable the bulls to target the 155 level, a possible intervention zone.

Investors should consider BoJ and Fed commentary, which will likely influence USD/JPY price trends before key data later in the week.

Conversely, a break below the 151.685 support level would bring the 150 level and the EMAs into play.

The 14-day RSI at 57.14 suggests a USD/JPY return to 155 before entering overbought territory.