USD/JPY Forecast: A Race to 150 Amid Intervention Fears

Highlights

• USD/JPY rebounds, ending Friday at 148.360, a notable contrast to Thursday’s fall.
• BoJ’s unwavering stance on negative rates continues to resonate in the market.
• USD/JPY eyeing 150; yet, governmental intervention threats loom, capping potential.

Friday Overview of USD/JPY Movements

On Friday, the USD/JPY gained 0.54%. Reversing a 0.52% fall from Thursday, the USD/JPY ended the day at 148.360. The USD/JPY fell to a low of 147.496 before rising to a session high of 148.417.

Bank of Japan Commitment to Negative Rates Resonates

The Bank of Japan commitment to an ultra-loose monetary policy stance will likely resonate today. On Friday, the Bank of Japan left interest rates and the yield curve control policy unchanged.

The decision to leave monetary policy unchanged came despite recent comments regarding moving away from negative rates.

However, while monetary policy leaves the Yen on the back foot, investors must contend with the threat of government intervention. The weaker Yen is impacting consumers. Consequently, the government continues threatening intervention to bolster the Yen, capping the upside for the USD/JPY.

Chicago Fed National Activity Index in Focus

After the disappointing US services PMI on Friday, investors must consider the Chicago Fed National Activity Index. Economists forecast an increase from 0.12 to 0.15 in August. Hotter-than-expected numbers would support the more hawkish Fed interest rate path.

Significantly, a pickup in activity would leave monetary and economic policy tilted toward the US dollar.

Other stats include the Dallas Fed Manufacturing Index numbers for September. However, the US manufacturing sector contributes 20% to GDP, likely limiting its impact on Fed policy goals.

Short-term Forecast

The USD/JPY remains on track for a visit to 150. However, the Japanese government could cap the upside on increasing threats of an intervention. Nonetheless, US economic indicators will dictate the near-term trends. Cracks in the US economy would shift the balance and signal the beginnings of a Yen recovery.

USD/JPY Price Action

Daily Chart

The USD/JPY held above the 50-day and 200-day EMAs, sending bullish price signals. A break above the 148.405 resistance level would support a move toward 150.

US economic indicators must support the hawkish Fed interest rate path for a run at 150. An unexpected fall in the Chicago Fed numbers would bring sub-147 into play.

Failure to move through the 148.405 resistance level would give the bears a run at the 146.649 support level.

The 62.39 14-Daily RSI supports a USD/JPY move through the 148.405 resistance level before entering overbought territory.

4-Hourly Chart

The USD/JPY remains above the 50-day and 200-day EMAs, reaffirming bullish price signals. A break above the 148.405 resistance level would give the bulls a run at 150.

However, a break below the 146.649 support level would bring the 50-day EMA into play.

The 62.30 14-4 Hourly RSI reading supports a USD/JPY break above the 148.405 resistance level before entering overbought territory.