USD/JPY Forecast: Impact of US JOLTs, US Manufacturing PMI, and FOMC Minutes

Highlights

• The USD/JPY gained 0.71% on Tuesday, ending the session at 141.979.
• On Wednesday, the focus will be on the US JOLTs Jobs Report, ISM Manufacturing PMI, and FOMC Meeting Minutes.
• Investors must track Bank of Japan commentary throughout the session.

USD/JPY Movements on Tuesday

The USD/JPY gained 0.71% on Tuesday. Reversing a 0.27% loss from Friday, the USD/JPY ended the session at 141.979. The USD/JPY fell to a low of 140.982 before rising to a Tuesday high of 142.213.

Bets on a Bank of Japan Pivot Remain a Headwind for the USD/JPY

The earthquake in Japan impacted the USD/JPY on Tuesday. However, market bets on a Bank of Japan pivot remain a headwind for the USD/JPY pairing. Wage negotiations in the Spring could be pivotal for the Bank of Japan. Favorable wage hikes could allow the Bank of Japan to provide more assertive guidance on the likely timing of an exit from negative interest rates.

Last week, BoJ Governor Kazuo Ueda reportedly warned the Bank could wait until after the Spring wage negotiations.

There are no economic indicators from Japan for investors to consider on Wednesday. The Japanese markets reopen on Thursday. However, investors must consider Bank of Japan commentary. Comments relating to inflation and interest rates would move the dial.

US JOLTS Job Openings, Manufacturing PMI, and FOMC Meeting Minutes in Focus

On Wednesday, JOLTs Job openings and JOLTs Job Quits will draw investor interest. Economists forecast Job Quits to fall from 3.628 million to 3.610 million in November. A downward trend in Job Quits could signal a weakening labor market environment. Employees are less likely to quit if labor market conditions are deteriorating.

However, economists expect job openings to increase from 8.733 million to 8.850 million, suggesting stable labor market conditions.

Deteriorating labor market conditions could impact wage growth and reduce disposable income. Downward trends in disposable income would affect consumer spending and dampen demand-driven inflation. A softer inflation outlook would support a less hawkish Fed rate path. A less hawkish Fed rate path would impact buyer demand for the USD/JPY.

ISM Manufacturing PMIs will also garner investor interest. A more marked contraction would support bets on a Q1 2024 Fed rate cut. However, investors must consider the sub-components, including prices and employment. Downward trends would signal a weakening demand environment.

Late in the US session, the FOMC Meeting Minutes warrant investor attention. The Minutes will give investors a better sense of whether a Q1 2024 rate cut is a consideration.

Short-term Forecast

Near-term trends for the USD/JPY hinge on US service sector data and the US Jobs Report. The markets are betting on a BoJ pivot and a Q1 2024 Fed rate cut. A pickup in US service sector activity and wage growth could force the Fed to delay rate cuts beyond Q1.

USD/JPY Price Action

Daily Chart

The USD/JPY sat below the 50-day and 200-day EMAs, sending bearish price signals.

A USD/JPY move through the 142.177 resistance level would give the bulls a run at the 200-day EMA.

Bank of Japan chatter, US stats, and the FOMC Meeting Minutes are focal points for the Wednesday session.

However, a fall through the 141 handle would bring the 139.359 support level into play.

The 14-day RSI at 38.25 suggests a USD/JPY break below the 141 handle before entering oversold territory.

4-Hourly Chart

The USD/JPY remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A USD/JPY break above the 142.177 resistance level and the 50-day EMA would support a move toward the 144.713 resistance level. Selling pressure could intensify at 141.200. The 50-day EMA is confluent with the 142.177 resistance level.

However, a drop below the 141 handle would give the bears a run at the 139.359 support level.

The 14-period 4-hour RSI at 52.99 suggests a USD/JPY move to the 144.713 resistance level before entering overbought territory.