USD/JPY Daily Forecast: PMI Uptick and BoJ Hike Speculation Could Boost Yen Demand

Jibun Bank Manufacturing PMI in Focus

On Monday, September 2, finalized manufacturing PMI numbers may influence the USD/JPY pair.

According to the preliminary survey, the Jibun Bank Manufacturing PMI rose from 49.1 in July to 49.5 in August.

An upward revision above 50 could boost demand for the Japanese Yen. The manufacturing sector accounts for about 20% of Japan’s economy. Increased manufacturing sector activity may strengthen Japan’s economy, raising expectations of a Q4 2024 Bank of Japan rate hike.

Expert Views on Japan’s Economy and BoJ Rate Path

Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, remarked on the preliminary private sector survey, stating,

“August flash PMI data signalled that the solid expansion of business activity at Japanese private sector firms was sustained midway through the third quarter of 2024. Growth was supported by an acceleration of services activity expansion, while manufacturing output returned to growth after declining briefly in July.”

Taro Kimura, economist at Bloomberg Economics, reacted to Friday’s inflation numbers from Tokyo, reportedly stating,

“The surprisingly sharp run-up in Tokyo’s August inflation will surely catch the Bank of Japan’s eye and, we think, puts a rate hike on the table for the October meeting. The report provides clear evidence that solid pay rises are feeding into consumer prices.”

An upward revision to the Jibun Bank Manufacturing PMI and speculation about a Q4 2024 BoJ rate hike could send the USD/JPY below 145.

US Economic Calendar

Later in the session on Monday, investors should track comments from the Fed. Comments relating to the US labor market, inflation, and the Fed rate path could impact US dollar demand.

According to market predictions, investors expect the Fed to cut interest rates by 25 basis points in September. Fed support for a 50-basis point rate cut to bolster the US labor market could indicate a USD/JPY fall below 145.

According to the CME FedWatch Tool, the probability of a 50-basis point Fed rate cut fell from 36.0% on August 23 to 30.0% on August 30.

Friday’s US Jobs Report could prove pivotal to the September interest rate decision. Higher unemployment and softer wage growth could fuel bets on a 50-basis point Fed rate cut.

Expert Views on the Fed Rate Path

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on Friday’s inflation numbers, stating,

“US Jul core PCE deflator slightly softer at 0.16%mom/2.6%yoy (mkt +0.2%m/+2.7%y), from 2.6%y in Jun PCE deflator in line at 0.2%m/2.5%y. Leaves Fed on track to cut in Sep, which in absence of much weaker jobs looks like being -0.25%”

Short-term Forecast: Bearish

USD/JPY trends will hinge on private sector PMI, wage growth, and household spending figures from Japan.

Positive data may boost bets on a Q4 2024 BoJ rate hike and Yen demand. However, US services sector PMI and US labor market data also require consideration. Weaker service sector activity and labor market conditions could raise bets on a 50-basis point September Fed rate cut. A more dovish Fed rate path could signal a USD/JPY fall toward 140.

Investors should remain vigilant. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered below the 50-day and 200-day EMAs, confirming the bearish price signal.

A USD/JPY breakout from 146.500 could support a move toward the 147.500 level. Furthermore, a return to 147.500 may give the bulls a run at the 148.529 resistance level.

The Jibun Bank Manufacturing PMI and central bank commentary require consideration.

Conversely, a break below the 145.891 support level could signal a drop toward 144.500. A fall through 144.500 may give the bulls a run at the 143.495 support level.

The 14-day RSI at 42.68 indicates a USD/JPY fall through the 143.495 support level before entering oversold territory.