USD/JPY Forecast: Manufacturing PMIs and US Jobless Claims in Focus

Japan’s Manufacturing PMIs in Focus

Finalized manufacturing PMI numbers from Japan will spotlight the USD/JPY.

According to the preliminary survey, the Jibun Bank Manufacturing PMI dropped from 50.0 in June to 49.2 in July.

A lower-than-prelim number could signal a deteriorating demand environment, affecting the Japanese economy and the Yen.

The manufacturing sector accounts for less than 30% of the Japanese economy. However, improving demand conditions could support job creation, wage growth, and consumer confidence. Tighter labor market conditions and rising consumer confidence could fuel household spending and demand-driven inflation.

A higher-than-expected PMI could drag the USD/JPY toward the 148 handle.

Expert Commentary

S&P Global Market Intelligence Economist Usamah Bhattie commented on the prelim private sector PMI survey, stating,

“Firms continued to note stubbornly high input prices in the private sector, particularly among manufacturers who recorded the steepest rise in cost burdens since April 2023.”

US Economic Calendar: Jobless Claims in Focus

Economists predict continuing jobless claims to rise from 1,851k in the week ending July 13 to 1,860k in the week ending July 20. Higher claims could fuel expectations of multiple 2024 Fed rate cuts.

Weaker labor market conditions could affect wage growth and disposable income, curbing consumer spending. Downward trends in disposable income may dampen demand-driven inflation, supporting a more dovish Fed rate path.

Fed Chair Powell’s Views on the Labor Market

On Wednesday, July 31, Fed Chair Powell commented on US labor market conditions, saying he did not want labor market conditions to weaken further. The Fed Chair has focused more on the US labor market in recent speeches and Q&As.

Goldman Sachs Research’s David Mericle commented on labor market conditions, saying that the US labor market is now back in balance and further softening would be unwelcome.

With inflation softening, recent comments suggest increased sensitivity to labor market data. A marked deterioration in labor market data could lead to more frequent Fed rate cuts. Moreover, it may also reignite investor fears of a hard US landing.

Short-term Forecast: Bearish

USD/JPY trends will hinge on US labor market data and central bank commentary. Weaker US labor market conditions could raise bets on multiple 2024 Fed rate cuts, impacting USD/JPY demand. Conversely, more hawkish BoJ commentary could drive Yen demand and signal a USD/JPY drop toward 145.

Investors should remain vigilant. Monitor real-time data, central bank monetary policy decisions, 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 sat below the 50-day and 200-day EMAs, sending bearish price signals.

A USD/JPY return to the 150 handle could support a move toward the 151.685 resistance level and the 200-day EMA. A breakout from the 200-day EMA could bring the 155 handle into play.

The Bank of Japan, manufacturing PMI numbers from Japan, and US labor market data require consideration.

Conversely, a break below the 148.529 support level and trend line could signal a drop toward the 145.891 support level. However, buying pressure could intensify at the 148.529 support level. The trend line is confluent with the support level.

The 14-day RSI at 19.88 shows the USD/JPY in oversold territory. Buying pressure could intensify at the 148.529 support level.