USD/JPY Forecast: BoJ Summary of Opinions, US Data, and Intervention Threats

The Bank of Japan, the Japanese Government, and the Japanese Yen

On Thursday, the market focus will remain on the Japanese government. Recent threats to bolster the Japanese Yen failed to send the USD/JPY below the 151 handle.

The Bank of Japan seemingly didn’t get the memo. BoJ Board Member Naoki Tamura spoke about raising interest rates slowly and steadily on Wednesday. The markets considered this dovish as Tamura offered no timeline for a second BoJ interest rate hike.

BoJ Governor Kazuo Ueda toed a similar line, preferring to support the economy with an accommodative monetary policy.

The comments countered the effects of the Japanese government’s threats to intervene.

Dynamics between the Bank of Japan and the Japanese Government will likely continue to influence the buyer appetite for the USD/JPY.

On Thursday morning, the Bank of Japan Summary of Opinions failed to move the dial. The Summary of Opinions was from the March 18 and 19 Monetary Policy Meeting.

Significantly, the BoJ has higher expectations for the economic outlook. Board members noted that the economy could be reaching a historic inflection point. The BoJ also stated that the outcome of the spring wage negotiations brings the price stability target into view. Services remained a focal point, with the BoJ needing an uptrend in services prices.

Regarding monetary policy, the Summary of Opinions stated,

“With the price stability target of 2%, the Bank should conduct monetary policy, guiding the short-term interest rate as a primary policy took, in response to developments in economic activity and prices as well as financial conditions from the perspective of sustainable and stable achievement of the target.”

US Economic Calendar: GDP, Labor, Sentiment, and the Fed

On Thursday, Q4 GDP and US labor market data kickstart the US session. An upward revision to preliminary GDP and tighter labor market conditions might affect investor bets on an H1 2024 Fed rate cut.

Tighter labor market conditions could support wage growth and increase disposable income. Upward trends in disposable income may fuel consumer spending and demand-driven inflation. A hotter-than-expected US economy could incentivize the Fed to take more decisive measures to cool the economy.

Economists forecast initial jobless claims to increase from 210k to 215k in the week ending March 23. According to preliminary estimates, the US economy grew 3.2% in Q4 after expanding by 4.9% in Q3.

Later in the session, the finalized Michigan Consumer Sentiment survey also needs consideration. According to the preliminary Survey, the Michigan Consumer Sentiment Index declined from 76.9 to 76.5 in March. Beyond the headline number, the inflation and expectation sub-components could influence the US dollar.

Moreover, investors should monitor FOMC member commentary. Deviation from the three-rate cut projection could drive buyer demand for the US dollar. Earlier today, FOMC member Christopher Waller warned about the risks of cutting interest rates too early, offering US dollar strength.

Short-term Forecast

Near-term trends for the USD/JPY will remain hinged on the US inflation numbers. Higher-than-forecast Core PCE Price Index numbers could cut bets on a June Fed rate hike on Friday. A more hawkish Fed rate path may need more than Japanese government threats to bolster the Yen.

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 breakout from the 151.685 resistance level would give the bulls a run at the 152 handle.

The Bank of Japan, intervention threats, and the US economic calendar need consideration.

Conversely, a USD/JPY drop below the 151 handle could support a fall toward the 50-day EMA and the 148.529 support level.

The 14-day RSI at 62.35 indicates a USD/JPY break above the 151.685 resistance level before entering overbought territory.