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USD/JPY Forecast: Balancing Yen Struggles Amidst BoJ and Fed Policy Divergence

By:
Bob Mason
Updated: Oct 2, 2023, 23:23 GMT+00:00

USD/JPY seesaws as threats of intervention shadow the Yen, with BoJ's policy and US labor news in focus.

USD/JPY Forecast

In this article:

Highlights

  • USD/JPY falls short of 150, maxing at 149.873, amid looming intervention threats to fortify the Yen.
  • However, a tangible divergence remains between the BoJ and Fed, tilting in favor of the US dollar.
  • US JOLTs report awaits, where an upturn would align with recent jobless claims data.

Monday Overview of USD/JPY Movements

On Monday, the USD/JPY rose by 0.36%. Following a 0.01% gain on Friday, the USD/JPY ended the day at 149.853. The USD/JPY fell to a low of 149.385 before reaching a high of 149.873.

Bank of Japan and Ultra-Loose Policy Cemented Near-Term

On Monday, the USD/JPY fell short of 150. Ongoing threats of an intervention to bolster the Yen capped the upside for the US dollar.

Negative interest rates and anticipation of continued ultra-loose monetary policy from the Bank of Japan (BoJ) keep the Yen defensive.

Over the weekend, Bank of Japan Governor Ueda reiterated previous comments relating to inflation and policy. The BoJ Governor reportedly said the BoJ must keep monetary policy ultra-loose until the recent cost-driven inflation turns into wage and domestic demand-driven price rises.

Recent wage growth and household spending numbers suggest the BoJ will remain ultra-loose for the foreseeable future.

US JOLTs Job Openings and the Fed in Focus

The US JOLTs Job Openings report will garner investor interest on Tuesday. An upturn in job openings would align with recent jobless claims figures. Economists forecast job openings to increase from 8.827 million to 8.830 million in August.

Beyond the headline figure, investors should consider quit rates. Higher quit rates reflect favorable labor market conditions and suggest workers are more confident to leave their current jobs for new positions.

Tight labor market conditions support wage growth, which fuels consumption and demand-driven inflation.

Wage growth remains a focal point for the Fed. A higher interest rate environment would impact the labor market, wage growth, and disposable income. A decrease in disposable income would weigh on consumer confidence and spending.

Beyond the numbers, FOMC member commentary will also influence the USD/JPY pair. FOMC members Loretta Mester and Raphael Bostic are on the calendar to speak today.

Short-term Forecast

Recent Bank of Japan and Fed comments leave monetary policy divergence tilted in favor of the US dollar. US labor market indicators and US service sector data will dictate the near-term USD/JPY trends. While the threat of an intervention lingers, the US dollar remains in the driving seat.

USD/JPY Price Action

Daily Chart

The USD/JPY held above the 50-day and 200-day EMAs, sending bullish price signals. Steering clear of sub-149 would support a USD/JPY break above the 150.293 resistance level.

Higher-than-expected US job openings and hawkish Fed comments would support a breakout.

However, an unexpected slide in job openings and dovish Fed comments would support a USD/JPY move to the 148.405 support level. Japanese government intervention in the FX markets would also deliver a fall below 149.

The 14-day RSI at 67.72 suggests that the USD/JPY could return to 150 before reaching overbought territory.

USD/JPY Daily Chart sends bullish price signals.
USDJPY 031023 Daily Chart

4-Hourly Chart

The USD/JPY remains above the 50-day and 200-day EMAs, reaffirming the bullish price signals. Avoiding a fall through the 50-day EMA would support a USD/JPY move to the 150.293 resistance level.

However, a USD/JPY fall below the 50-day EMA would give the bears a run at the 148.405 support level.

The 67.39 14-4 Hourly RSI signals a USD/JPY return to 150 before entering overbought territory.

4-Hourly Chart affirms bullish price signals.
USDJPY 031023 4-Hourly Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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