USD/JPY Forecast: The BoJ, Household Spending, the Fed, and 155

The Bank of Japan and Household Spending

On Thursday, the Bank of Japan could influence the buyer appetite for the USD/JPY.

Bank of Japan Board member Asahi Noguchi will be in the spotlight. Forward guidance on monetary policy may influence buyer appetite for the Japanese Yen.

Since the Bank of Japan exited negative interest rates, the USD/JPY has tumbled to the 154 handle. Forward guidance impacted buyer demand for the Japanese Yen, with the BoJ signaling the need for accommodative policy measures.

However, the weaker Japanese Yen impacts import prices and household spending. Household spending and the services sector are considerations for the Bank of Japan. Hopes of recent wage hikes translating into a demand-driven inflation environment could fade if the weakness in the Yen persists.

On Wednesday, trade data from Japan highlighted the effects of a weak Yen on demand. The trade balance grew from a ¥377.8 billion deficit to a ¥366.5 billion surplus in March. However, imports fell by 4.9% year-on-year in March after rising by 0.5% in February.

US Economic Calendar: Jobless Claims, the Philly Fed, and the Fed

On Thursday, the US labor market will be in focus. Economists forecast initial jobless claims to increase from 211k to 215k in the week ending April 13. An unexpected spike in jobless claims may influence the Fed rate path.

Recent economic indicators, including inflation, labor market data, and retail sales figures, have impacted investor expectations of a June Fed interest rate cut. Tight labor market conditions are bolstering wage growth, which in turn increases disposable income. This upward trend in disposable income could fuel consumer spending and demand-driven inflation.

In response to the latest round of economic indicators, investors shifted bets to a September Fed rate cut. However, a deterioration in labor market conditions could impact wage growth and refuel investor bets on a June rate cut.

The jobless claims report is the focal point. However, the Philly Fed Manufacturing Index also warrants investor attention. A larger-than-expected fall could test investor expectations regarding the US avoiding a recession.

Economists forecast the Philly Fed Manufacturing Index to fall from 3.2 to 1.5 in April.

Amidst falling bets on a 2024 Fed rate cut, investors should also monitor FOMC member chatter. FOMC members Raphael Bostic, Michelle Bowman, and John Williams are on the calendar to speak. Forward guidance on interest rate goals would move the dial. FOMC member Michelle Bowman recently warned the Fed could hike rates if inflation doesn’t cool.

Short-term Forecast

Near-term trends for the USD/JPY remain hinged on Bank of Japan and Fed forward guidance. Interest rate differentials leave the US dollar in the driving seat. A shift in the Bank of Japan stance on zero interest rates could offer Yen relief.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY breakout from the April 16 high of 154.787 would give the bulls a run at the 155 handle.

Bank of Japan commentary, US economic data, Fed speakers, and the Middle East need consideration.

Conversely, a USD/JPY fall through the 153.5 handle would bring the 151.685 support level into play.

The 14-day RSI at 72.72 shows the USD/JPY in overbought territory. Selling pressure will likely intensify at the April 16 high of 154.787.