USD/JPY Forecast: BoJ Accommodation, Fed Speakers, and 152 Barrier Dynamics

An Accommodative Bank of Japan, Interventions, and 152

On Tuesday, the Bank of Japan and the Japanese government could impact buyer demand for the USD/JPY. Recent economic indicators from Japan have given the BoJ little reason to shift from post-pivot forward guidance. The BoJ pivoted from negative rates in March. However, views on the BoJ interest rate path left the USD/JPY in ascendancy despite the first BoJ rate hike in 17 years.

BoJ forward guidance that deviates from a lower-for-longer interest rate path could pull the USD/JPY back from the intervention zone.

There are no economic stats from Japan to influence buyer demand for the Yen on Tuesday. The lack of stats will also leave the Japanese government and intervention threats in focus.

152 remains the line in the sand for the global financial markets. A USD/JPY break above the 152 barrier could force the Japanese government into action. Since March 20, the USD/JPY has faced daily rejection at the 151.685 resistance level.

US JOLTs Job Openings, Factory Orders, and Fed Speakers

Later in the Tuesday session, US factory orders and labor market data will draw investor interest. After the hotter-than-expected ISM Manufacturing PMI, a jump in factory orders could fuel expectations the US will avoid a recession. Economists forecast factory orders to rise by 1.0% in February after tumbling 3.6% in January.

However, US labor market data could impact the USD/JPY more. A larger-than-expected fall in job openings could force investors to recalibrate bets on a June Fed rate cut. A weaker labor market environment could affect wage growth, reduce disposable income, and impact consumer confidence. The net effect could be a pullback in consumer spending, dampening demand-driven inflation.

A softer private consumption outlook could allow the Fed to consider a June interest rate cut.

Economists forecast JOLTs Job Openings to decline from 8.863 million to 8.790 million in February. Investors should also consider JOLTs Job Quits.

Downward trends in quit rates could signal a deteriorating view of the US labor market. The workforce is unlikely to leave existing jobs if there are concerns about the labor market environment. Economists forecast JOLTs Job Quits to fall from 3.385 million to 3.370 million.

With the US labor market in the spotlight, investors must track Fed speakers throughout the day. Fed Vice Chair John Williams and FOMC members Michelle Bowman, Mary Daly, and Loretta Mester are on the calendar to speak. Reactions to the US Personal Income and Outlays Report, labor market data, and views on the timing of a Fed rate cut could move the dial.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on services PMIs from Japan and the US, BoJ and Fed commentary, and the US Jobs Report. A hotter-than-expected US Services PMI and US Jobs Report could tilt monetary policy divergence further in favor of the US dollar. However, intervention threats may continue to limit the upside for the USD/JPY pairing.

USD/JPY Price Action

Daily Chart

The USD/JPY sat above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY breakout from the 151.685 resistance level would bring the 152 handle into play.

The BoJ, intervention threats, US labor market data, and Fed speeches warrant investor consideration.

Conversely, a USD/JPY drop below the 151.500 handle could give the bears a run at the 50-day EMA. A fall through the 50-day EMA could bring the 148.529 support level into view.

The 14-day RSI at 64.76 suggests a USD/JPY break through the 152 barrier before entering overbought territory.