USD/JPY Forecast: As Japanese Yen Navigates BoJ Signals, US Jobs News Takes Center Stage

Highlights

• USD/JPY witnessed a modest decline of 0.05%, despite Tuesday’s impressive 0.85% rally to close at 147.648.
• BoJ and Fed’s influential voices today might steer the immediate trajectory for USD/JPY amid economic indicators.
• US job market dynamics today: any unexpected dip in jobless claims challenges the prevalent Fed pause theory.

Wednesday Overview

The USD/JPY slipped by 0.05% on Wednesday. Following a 0.85% rally on Tuesday, the USD/JPY ended the day at 147.648. The USD/JPY rose to a high of 147.816 before sliding to a low of 147.015.

Bank of Japan Monetary Policy Goals in Focus

Bank of Japan board member Nakagawa is on the calendar to speak this morning. Hawkish chatter regarding negative rates would offer Yen support. In recent weeks, board members have sent mixed signals vis-à-vis the ultra-loose monetary policy stance. In a recent speech, board member Naoki Tamara discussed ending negative rates in 2024.

However, Tamara aligned with BoJ Governor Ueda, highlighting the need for wage growth and demand-driven inflation. Similar comments this morning would leave the BoJ in ultra-loose over the nearer term.

Household spending unexpectedly tumbled by 2.7% in July, diminishing hopes of a shift in BoJ policy. A downward trend in spending eases demand-driven inflationary pressures.

US Jobless Claims and the Fed in Focus

The US labor market is in the spotlight today. An unexpected fall in jobless claims could test the Fed pause theory. Tighter labor market conditions would support wage growth and consumption. Increased spending power and consumption would fuel demand-driven inflationary pressures.

Following the better-than-expected US ISM PMI numbers, FOMC member speeches will also influence. FOMC members Bowman and Harker and Fed Vice Chair John Williams speak today. Hawkish comments would support a USD/JPY breakout.

Short-term Forecast

With BoJ and Fed speakers in focus today, the latest economic indicators support a more hawkish Fed. However, US jobless claims must remain stable to raise the bets on a final Fed interest rate hike.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered below the $148.405 resistance level. Nonetheless, the USD/JPY remained above the 50-day and 200-day EMA, sending bullish price signals. Dovish BoJ commentary paired with hawkish Fed chatter would support a run at the 148.405 resistance level.

However, the threat of a Japanese government intervention could cap the upside at 148. Weak US jobless claims and dovish Fed chatter would bring sub-147 and the 146.649 support level into play.

The 65.76 14-Daily RSI reading supports a USD/JPY run at 148 before entering overbought territory.

4-Hourly Chart

The USD/JPY holds above the 146.649 support band and the 50-day EMA. Avoiding sub-147 would give the bulls a run at the 148.405 resistance band. However, Fed speakers must deliver hawkish comments on interest rates to support a run at 148.

Dovish Fed commentary and a spike in US jobless claims would bring the 146.649 support level and 50-day EMA into view. The 50-day EMA is confluent with the support level, suggesting demand at 146.50.

The 67.10 14-4H RSI reading indicates the USD/JPY has room to hit 148 before entering oversold territory.