Japanese Yen Weekly Forecast: USD/JPY Price Action Hinges on Fed Speeches and US Data

USD/JPY Extends Winning Streak as Fed and BoJ Policy Stances Collide

USD/JPY faces intensifying volatility as central bank rhetoric and Japanese politics trigger monetary policy and price volatility.

The USD/JPY pair advanced 0.21% to close at 147.958 in the week ending September 19. In a choppy week, the pair slid to a low of 145.481 before briefly rebounding to a high of 148.284.

The Bank of Japan announced plans to begin offloading its $250 billion holding in exchange-traded funds (ETFs) and Japanese Real Estate Investment Trusts (JREITs) on Friday, September 19. The adjustment signaled a further shift from ultra-loose monetary policy.

While the BoJ kept interest rates at 0.5%, a 7-2 vote split fueled speculation about a near-term rate hike, sending USD/JPY below 148.

Outlook: Services PMI and Inflation to Fuel BoJ Rate Hike Bets

This week’s economic calendar—services PMI, Tokyo inflation, and BoJ rhetoric—will be key price catalysts for the yen.

Will Services Sector Inflation Signal an October Policy Adjustment?

On Wednesday, September 24, Japanese service sector PMI numbers could affect the timeline for a BoJ rate hike. Economists forecast the S&P Global Services PMI to rise from 53.1 in August to 53.4 in September.

A higher PMI reading could signal a pickup in momentum, given that the services sector accounts for over 70% of Japan’s GDP. Beyond the headline PMI, the employment and price trends could be pivotal. Rising employment and higher prices may suggest increasing inflationary pressures, supporting a more hawkish BoJ policy stance. Services sector inflation remains a key contributor to national inflation.

On the other hand, slower services sector activity, falling employment, and lower prices may temper BoJ rate hike bets, weighing on yen demand.

Tokyo Inflation in the Spotlight after BoJ Dissents

On Friday, September 26, Tokyo inflation will take center stage. Economists expect Tokyo’s annual inflation rate to rise from 2.6% in August to 2.9% in September and the so-called ‘core-core inflation rate to hit 3.3% (August: 3%). A move further away from the BoJ’s 2% target may raise the chances of an October policy adjustment, boosting appetite for the yen.

Conversely, a lower core-core reading may push back a rate hike until December, or potentially January. A less hawkish rate path may weigh on the yen.

Last Friday (September 19), the BoJ’s policy announcement hinted at plans to reach monetary policy normalization sooner than expected. Rising inflation may expedite rate hikes, potentially triggering a yen carry trade unwind. A resurgent yen could force investors to sell risk assets and repay yen-denominated debt, sending USD/JPY lower.

In July 2024, the BoJ reduced its purchases of Japanese Government Bonds (JGBs) and unexpectedly raised interest rates. A yen carry trade unwind pushed USD/JPY from 155.216 on July 31, 2024, to a September 14, 2024, low of 139.576. A more hawkish BoJ policy stance could have similar effects on USD/JPY trends.

Bookmark our real-time updates to stay ahead of USD/JPY volatility.

USD/JPY Outlook: Economic Indicators and the BoJ

• Bullish Yen Scenario: Stronger Japanese data or hawkish BoJ signals could push USD/JPY toward 145.
• Bearish Yen Scenario: Weaker Japanese data or dovish BoJ rhetoric may send the pair toward 150.

Services PMI, Jobless Claims, GDP, and Inflation in Focus

In the US, it’s another crucial week for the US dollar as markets consider the Fed’s policy stance and upcoming economic data. Services PMI data, jobless claims, GDP, and the Personal Income and Outlays report will influence the Fed rate path and US dollar trends.

Key events include:

• Services PMI (September 23): Expected to fall from 54.5 in August to 53 in September.
• GDP (September 25): Prelim figures showed the US economy expanded 3.3% quarter-on-quarter in the second quarter.
• Initial Jobless Claims (September 25): Forecast to rise from 231k (week ending September 13) to 240k (week ending September 20).
• Core PCE Price Index (September 26): Expected to increase 3% year-on-year in August after rising 2.9% in July.

A sharper fall in services PMI, higher jobless claims, and softer-than-expected inflation could fuel bets on October and December Fed rate cuts. A more dovish Fed rate path could dampen investor appetite for the US dollar.

Conversely, stronger service sector activity, fewer claims, and higher inflation could support a less dovish Fed policy stance through the remainder of 2025. A less dovish Fed rate path could boost demand for the US dollar.

Beyond the data, traders should closely monitor Fed speeches. Fed Chair Powell is due to speak on Tuesday, September 23. Multiple FOMC members are also on the calendar to deliver speeches.

Short-term Forecast:

USD/JPY’s near-term outlook will hinge on key economic data and Fed speakers.

• Bullish US Dollar Scenario: Strong US data or a hawkish Fed rhetoric may drive USD/JPY toward 150.
• Bearish US Dollar Scenario: Weaker US data or dovish Fed cues could push USD/JPY toward 145.

USD/JPY Price Action

Daily Chart

On the daily chart, the USD/JPY trades above the 50-day and the 200-day Exponential Moving Averages (EMAs). The indicators suggest a bullish bias.

A breakout above the September 19 high of 148.284 could pave the way to the 149.358 resistance level. A move through 149.358 may open the door to testing the August 1 high of 150.917.

On the downside, a break below the 200-day EMA could expose the 50-day EMA. If breached, 145 would be the next key support level.

Key Takeaway

Ongoing USD/JPY volatility reflects marked shifts in sentiment toward monetary policy. Tracking real-time developments will be key, with both the Fed and BoJ in focus.

Consult our economic calendar for historical and upcoming data.