Japanese Yen Forecast: Could Consumer Confidence Drive USD/JPY Below 142.5?

Consumer Confidence and the Japanese Yen

On Wednesday, October 2, consumer confidence figures from Japan could impact buyer demand for the USD/JPY. Economists forecast Japan’s Consumer Confidence Index to increase from 36.7 in August to 37.1 in September.

A higher-than-expected Index could signal a pickup in household spending. Upward trends in household spending may fuel demand-driven inflation, supporting a Q4 2024 Bank of Japan rate hike. Furthermore, improving consumer confidence may boost service sector activity. Services sector data is a focal point for the BoJ.

Bank of Japan Governor Kazuo Ueda recently emphasized the significance of the services sector, stating,

“October is a month when service price revisions are concentrated in Japan, so we must scrutinize data carefully.”

Japan’s finalized Jibun Bank Services PMI will be out on Thursday, October 3.

Better-than-expected consumer confidence figures could support a USD/JPY drop toward 142.5.

Expert Views on the Bank of Japan Rate Path

Reporter Erica Yokoyama commented on Tuesday’s Tankan figures from Japan, stating,

“Confidence among Japan’s large manufacturers held steady from three months ago, keeping the Bank of Japan on track to consider a rate hike late this year or early next.”

US ADP Employment in the Spotlight

Later in the Wednesday session, US ADP employment figures could influence US dollar demand. Economists expect the ADP to report a 120k increase in employment in September, up from 99k in August.

Following Tuesday’s JOLTs Report, a higher ADP figure could further support expectations of a soft US economic landing. Tighter labor market conditions could drive wage growth and consumer spending, which accounts for over 60% of GDP.

Furthermore, tighter labor market conditions could temper bets on a 50-basis points November rate cut, possibly pushing the USD/JPY toward 145.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on consumer confidence and Services PMI data from Japan and US labor market trends.

Improving consumer confidence and service sector activity could bolster bets on a Q4 2024 BoJ rate hike, supporting Yen demand. However, upbeat US labor market data may signal a less dovish Fed rate path, leaving a wider-than-expected interest rate differential between the US and Japan. A less dovish Fed rate path could push the USD/JPY toward 145.

Traders should stay vigilant as this week’s data will impact trading USD/JPY strategies. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY remains well below the 50-day and 200-day EMAs, affirming bearish price signals.

A USD/JPY climb to the 144.5 level could signal a move toward the 145.891 resistance level. Furthermore, a break above the 145.891 resistance level may give the bulls a run at the 147.5 level.

The US and Japan’s economic data and central bank commentary require consideration.

Conversely, a fall through the 143.495 support level could bring the 141.032 support level into play.

The 14-day RSI at 47.53 suggests a USD/JPY drop toward the 141.032 support level before entering oversold territory.