USD/JPY Daily Forecast: US Jobless Claims and Services PMI to Influence Market Sentiment

The all-important Jibun Bank Services PMI, on August 22, will influence buyer appetite for the USD/JPY.

The Services Sector and the Bank of Japan

Economists forecast the Jibun Bank Services PMI to increase from 53.7 in July to 54.0 in August.

A larger-than-expected increase could fuel speculation about a possible Q4 2024 Bank of Japan (BoJ) rate hike. The services sector accounts for over 70% of the Japanese economy. Furthermore, the BoJ needs the services sector to drive demand-driven inflation to support a higher interest rate environment.

In addition to the headline PMI, investors should consider the employment and price subcomponents. Upward trends in job creation and wages could signal higher household spending, possibly fueling demand-driven inflation. Suggestions of a higher inflation rate could raise expectations of a Q4 BoJ rate hike.

Positive figures may push the USD/JPY down toward 143.

US Economic Calendar

Later in the session, US jobless claims and services sector PMI numbers will require consideration amid ongoing speculation about a hard US economic landing.

US Initial Jobless Claims

Economists forecast initial jobless claims to increase from 227k in the week ending August 10 to 230k in the week ending August 17.

A larger-than-expected increase could support expectations of multiple 2024 Fed rate cuts. Weaker labor market conditions can negatively impact wages and disposable income, possibly curbing consumer spending. Downward trends in consumer spending may affect the US economy as it contributes over 60% to GDP.

Significantly, a spike in initial jobless claims (+250k) could retrigger investor fears of a hard US economic landing and fuel bets on a 50-basis point September Fed rate cut. A more dovish rate path could push the USD/JPY down toward 140.

Expert Views on the US Labor Market

Wall Street Journal Chief Economics Correspondent Nick Timiraos remarked on the US Bureau of Labor Statistics revisions, stating,

“BLS revisions show the economy added 818,000 fewer jobs than previously reported over the 12 months ended March. That would lower monthly payroll gains (initially +246K) by 68K a month, on average. This means job growth was +1.4% in March 2024, versus previously reported +1.9%. This revision of -0.5% to the employment level is the largest since 2009.”

US Services PMI

Economists predict the S&P Global Services PMI will fall from 55.0 in July to 54.0 in August.

Accounting for over 70% of the US economy, a fall toward 50.0 could fuel speculation about a US economic recession.

Investors should also consider the employment and price subcomponents. Lower input prices and weaker job creation rates could signal a 50-basis point September Fed rate cut to bolster the US economy. Weaker-than-expected PMI numbers could push the USD/JPY down toward 143.

Short-term Forecast: Bearish

USD/JPY trends will depend on the services PMIs, US jobless claims, and central bank forward guidance. Positive data service sector data from Japan may support a Q4 2024 BoJ rate hike and a USD/JPY drop below 143.  Weak US economic data, combined with growing speculation about a 50-basis point rate cut by the Fed in September, could push the USD/JPY down 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 remained well below the 50-day and 200-day EMAs, affirming the bearish price signals.

A USD/JPY break above the 145.891 resistance level could signal a return to 147.500. Furthermore, a breakout from 147.500 may give the bulls a run at the 148.529 resistance level and trend line.

Service sector PMIs and central bank commentary require consideration.

Conversely, a break below 144 could give the bears a run at the 143.495 support level. A fall through the 143.495 support level may signal a fall toward the 141.032 support level.

The 14-day RSI at 31.27 indicates a USD/JPY drop below 144 before entering oversold territory.