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Category: Forex News, News

USD/JPY Forecast: Eyes on BoJ Commentary Amid Weaker Japanese Yen Concerns

Economists forecast the Philly Fed Manufacturing Index to remain steady at 4.5. An unexpected slide in the Index could raise concerns about a US hard landing. However, the numbers may not materially influence the Fed rate path. The manufacturing sector contributes less than 30% to the US economy.

On the other hand, US jobless claims data could influence investor expectations of a September Fed rate cut.

Economists forecast initial jobless claims to fall from 242k to 235k in the week ending June 15.

Lower-than-expected numbers could temper investor expectations of a Fed rate cut. Tighter labor market conditions may support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.

A higher-for-longer Fed rate path may reduce borrowing costs, reduce disposable income, and curb consumer spending.

Other stats include housing sector-related data. However, the stats will likely play second fiddle to the labor market numbers.

With the US labor market in focus, investors should track FOMC member speeches. FOMC Member Thomas Barkin is on the calendar to speak. Views on inflation and the timing of a Fed rate cut could influence buyer demand for the US dollar.

The Richmond Fed President spoke on Tuesday, saying more progress on inflation would be needed to cut interest rates.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on BoJ chatter, inflation numbers from Japan, and Services PMIs from Japan and the US. An increase in service sector activity in Japan and inflation figures exceeding expectations could prompt the BoJ to consider initiating rate hike discussions.

A more hawkish stance from the BoJ could shift the divergence in monetary policies toward the Yen, especially as the Fed contemplates an interest rate cut.

USD/JPY Price Action

Daily Chart

The USD/JPY remained well above the 50-day and 200-day EMAs, confirming the bullish price trends.

A USD/JPY return to the 158 handle could give the bulls a run at the 160 handle and the April 29 high of 160.209.

Central bank chatter and US labor market data require investor attention.

Conversely, a USD/JPY fall through the 157.5 handle could signal a drop to the 50-day EMA. A break below the 50-day EMA could bring the 151.685 support level into play.

The 14-day RSI at 60.43 indicates a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.

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