Waning consumer confidence and elevated inflation expectations could signal a pullback in consumer spending. Softer spending trends could dampen inflation and the US economy, given that private consumption accounts for roughly 65% of GDP.

A cooling inflation outlook and potential loss of economic momentum may raise expectations of a December Fed rate cut. A more dovish Fed rate path could push USD/JPY toward the 50-day Exponential Moving Average (EMA).

On the other hand, a pickup in consumer sentiment and easing inflation expectations could signal an upswing in consumer spending, supporting a less hawkish Fed policy stance. Fading bets on a December Fed rate cut could send USD/JPY toward the November 4 high of 154.483.

Fed Speakers in Focus as Labor Market Data Flashes Red

Beyond the data, FOMC members’ speeches will require consideration, given growing concerns about the US labor market. According to Challenger, Gray, & Christmas data, job cuts soared from 54.064k in September to 153.074k in October, raising bets on a December Fed rate cut.

According to the CME FedWatch Tool, the chances of a December policy adjustment rose from 62.0% to 70.6% on Thursday, November 6.

Growing Fed support for a rate cut in December could weigh on the US dollar, supporting a USD/JPY fall toward 151 and the 50-day EMA. Conversely, continued concerns about elevated inflation, despite a cooling labor market, may send the pair toward 154.483.

Given the US labor market data and potential impact on wage growth and spending, the near-term outlook looks bearish for USD/JPY.

USD/JPY Scenarios: Diverging Monetary Policies

• Bearish USD/JPY Scenario: Hawkish BoJ rhetoric, intervention threats, weak US data, and dovish Fed cues could push USD/JPY toward 151.
• Bullish USD/JPY Scenario: Dovish BoJ commentary, strong US data, and hawkish Fed policy signals could send USD/JPY toward 154.483.