USD/JPY Daily Forecast: Will Japan’s Q2 GDP Support a Drop Below 146?

Japan Under the Spotlight

On Thursday, August 15, preliminary GDP numbers for Japan will put the USD/JPY in focus.

Economists expect the economy to grow by 0.5% quarter-on-quarter in Q2 2024, reversing a 0.5% contraction from Q1 2024.

Better-than-expected numbers could support a USD/JPY drop below 147. Trends in private consumption could be crucial for the Bank of Japan’s interest rate trajectory. In Q1 2024, private consumption declined by 0.7%. Upward trends in private consumption may fuel demand-driven inflation, supporting a more hawkish BoJ rate path.

While upbeat numbers could support a more hawkish BoJ rate path, investors should consider commentary from the BoJ. The recent Yen carry trade unwind forced the BoJ to downplay further rate hikes to restore market stability. More of the same may be likely while the threat of another Yen carry trade unwind lingers, possibly limiting the influence of GDP numbers on the Yen.

Bank of Japan Assurance

Last week, Bank of Japan Deputy Governor Uchida Shinichi calmed the global markets, saying,

“I believe that the Bank needs to maintain monetary easing with the current policy interest rate for the time being, with developments in financial and capital markets at home and abroad being extremely volatile.”

Former BoJ Board Member Makoto Sakurai also shared his views on the BoJ’s policy outlook, saying,

“They won’t be able to hike again, at least for the rest of the year. It’s a toss-up whether they can do one hike by next March.”

US Economic Calendar

Later in the Thursday session, traders should consider the US labor market and retail sales data. The reports may influence investor sentiment toward the US economy and the Fed rate path.

Initial Jobless Claims

Economists forecast initial jobless claims to rise from 233k in the week ending August 3 to 235k in the week ending August 10.

An unexpected spike in initial jobless claims could retrigger investor fears of a hard US economic landing.

A deterioration in US labor market conditions could affect wage growth, consumer confidence, and spending. A pullback in consumer spending could impact the US economy since it contributes over 60% to GDP.

Expectations of multiple Fed rate cuts to bolster the US economy could narrow the interest rate differential between the US and Japan, possibly pushing the USD/JPY below 145.

US Retail Sales Crucial for Sustained Growth

Economists expect retail sales to increase by 0.3% in July after stalling in June.

Higher-than-expected figures could ease fears of a US economic recession. However, the jobless claims will likely have a greater impact on the Fed, which has increased its focus on its full employment mandate.

Expert Commentary

Arch Capital Global Chief Economist Parker Ross remarked on the US CPI Report and the Fed rate path, stating,

“Core services inflation (0.31% m/m) – the sticky component the Fed has been worried about – bounced back in July from its weakest monthly reading since 2021.”

The CPI Report shifted the focus to the US labor market data and the US economy. The Fed hawks may have little ground to keep interest rates unchanged if there’s a marked deterioration in labor market conditions.

Short-term Forecast: Bearish

USD/JPY trends will hinge on Japan’s GDP and US economic data. Upbeat GDP numbers from Japan and weaker US data could push the USD/JPY toward 145.

Investors should remain alert. 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 well below the 50-day and 200-day EMAs, confirming the bearish price trends.

A USD/JPY breakout from the 148.529 resistance level and the top trend line could signal a move toward 150. Furthermore, a break above 150 could bring the 151.685 resistance level into play.

Economic indicators from Japan and the US require consideration on Thursday.

Conversely, a drop below the 145.891 support level could signal a fall toward the 143.495 support level.

The 14-day RSI at 33.31 suggests a USD/JPY break below 147 before entering oversold territory.