USD/JPY Forecast: The BoJ, US GDP Numbers, and Fed Speeches in Focus

USD/JPY Movement on Tuesday

The USD/JPY declined by 0.12% on Tuesday. After a 0.13% gain on Monday, the USD/JPY ended the Tuesday session at 150.499. The USD/JPY rose to a high of 150.701 before falling to a Tuesday low of 150.071.

Bank of Japan Under the Spotlight

On Wednesday, investors must monitor Bank of Japan commentary. January inflation numbers from Japan were hotter than expected, raising bets on an April BoJ pivot from negative rates.

BoJ reaction to the inflation numbers would influence the buyer appetite for the USD/JPY pair. However, the macroeconomic environment remains a consideration. Amidst a sticky inflation environment, Japanese firms must deliver on wage hike expectations to enable the BoJ to exit negative rates.

A favorable outcome to wage negotiations in March could fuel household spending and demand-driven inflation. An exit from negative rates may deliver price stability. However, investors must be mindful that the BoJ will not aggressively hike interest rates after pivoting from negative rates.

In recent speeches, the BoJ warned against expectations of a hawkish post-pivot BoJ interest rate trajectory.

US Economic Calendar: Q4 GDP Numbers and FOMC Member Speeches in Focus

On Wednesday, US GDP figures for Q4 will warrant investor attention. According to the first estimate report, the US economy expanded by 3.3% in Q4 after growing by 4.9% in Q3. Revisions to the first estimate could influence the timeline of a Fed rate cut.

Upward revisions would signal a hotter-than-expected economy, with more cooling needed to tame inflation. A more hawkish rate path could reduce disposable income and curb consumer spending. Downward trends in consumer spending may dampen demand-driven inflation.

Notably, investors must consider the details of the GDP Report. Personal income, disposable income, and savings data could influence the outlook for private consumption.

Other stats include US trade data and inventory numbers for January. However, these are likely to play second fiddle to the GDP Report.

With the US economy under the spotlight, investors must monitor Fed commentary. Fed Vice Chair John Williams and FOMC members Raphael Bostic and Susan Collins are on the calendar to speak. Views on the US economy, inflation, and Fed rate cuts would move the dial.

Short-term Forecast

Near-term trends for the USD/JPY will likely hinge on US inflation numbers and central bank chatter. BoJ support for an April pivot could tilt monetary policy divergence toward the Yen. However, US inflation must be softer to signal an H1 2024 Fed rate cut and a USD/JPY retreat toward 140.

USD/JPY Price Action

Daily Chart

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

A USD/JPY return to the 150.500 handle would give the bulls a run at the 151.889 resistance level.

Central bank chatter and US economic data need consideration.

However, a break below the 150.201 support level may lead to a fall toward the 148.405 support level.

The 14-day RSI at 63.36 indicates a USD/JPY move to the 151 handle before entering overbought territory.

4-Hourly Chart

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

A USD/JPY return to the 151 handle would support a move to the 151.889 resistance level.

However, a break below the 50-day EMA and the 150.201 support level would bring the 148.405 support level into view. Buying pressure may intensify at the 150.201 support level. The 50-day EMA is confluent with the support level.

The 14-period 4-hour RSI at 51.87 suggests a USD/JPY rise to the 151.889 resistance level before entering overbought territory.