USD/JPY Forecast: Analyzing Yen’s Response to BoJ Commentary and US Economic Calendar

Highlights

• USD/JPY increased by 0.10% on Monday, recovering from a morning low of 146.271 to end the day at 146.527.
• BoJ Governor Ueda disappoints the Yen bulls by not committing to moving away from ultra-loose monetary policy.
• A jump in consumer confidence and job openings could support a hawkish Fed outlook and affect the USD/JPY.

Monday Overview

On Monday, the USD/JPY rose by 0.10%. Following a 0.38% gain on Friday, the USD/JPY ended the day at 146.527. After a mixed morning, the USD/JPY fell to a low of 146,271 before striking a high of 146.745.

Bank of Japan Governor Ueda Comments Resonate

On Friday, Bank of Japan Governor Ueda placed monetary policy divergence firmly in the hands of the dollar. The Bank of Japan Governor disappointed investors hoping for a commitment to move from ultra-loose. In contrast, Fed Chair Powell talked about higher rates.

On Monday, the Cabinet Office released the August monthly economic report. Despite the government seeing an improving macroeconomic environment, the USD/JPY avoided a Monday loss.

Today, there are no economic indicators to shift sentiment toward BoJ monetary policy. The lack of economic indicators leaves BoJ commentary and the US economic calendar to move the dial. Weak US economic indicators would narrow monetary policy divergence.

However, Japan’s inflation dynamic needs to begin taking shape for investors to bet on a BoJ move away from ultra-loose.

US Consumer Confidence and Job Openings to Deliver a First Test

Market bets on a September Fed rate hike could materially change this week. Consumer confidence and JOLTs job openings will be the first test for the dollar bulls.

With Fed Chair Powell leaving the door ajar for further rate hikes, a jump in consumer confidence would raise bets on a September rate hike. An upward trend in consumer confidence would signal an increased appetite for spending. Increased consumer spending fuels demand-driven inflation.

However, US JOLTs Job Openings must also impress to support a hawkish Fed outlook. Beyond the headline number, quit rates should be a focal point. An upward trend in quit rates reflects worker confidence in labor market conditions.

Economists forecast job openings to increase from 9.582 million to 9.793 million. While economists expect consumer confidence to weaken, a fall from 117.0 to a forecasted 116.0 would still be bullish.

USD/JPY Price Action

Daily Chart

The lower level of the 146.6 – 147.3 resistance band capped the upside on Monday. However, we expect further price action today, with US consumer confidence and job openings in focus. Hotter-than-expected numbers would break down resistance at 146.6 to target 147.

Considering the 14-Daily RSI at 64.24, the USD/JPY would have more room to run before hitting overbought territory. With the 50-day and 200-day EMAs sending bullish signals, US economic indicators must be dire to shift sentiment toward the US economy and bring the 145.0 – 144.3 support band into play.

4-Hourly Chart

While the 4-Hourly Chart affirms the near and longer-term price signals, a slump in US confidence and a fall in quit rates would bring the 50-day EMA and the 145.0 – 144.3 support band into play.

However, the EMAs send bullish price signals. Hotter-than-expected US economic indicators would see the USD/JPY breakdown resistance at 146.6 to target 147.

The 14-4H RSI reading of 64.67 supports more upside before hitting overbought territory.