USD/JPY Forecast: BoJ Board Member Adachi, USD GDP, and Fed Speakers in Focus

Highlights

• The USD/JPY slid by 0.81% on Tuesday, ending the session at 147.471.
• US consumer confidence and dovish Fed comments contributed to the US dollar losses.
• On Wednesday, the Bank of Japan and US GDP numbers for Q3 will be in focus.

USD/JPY Movements on Tuesday

The USD/JPY slid by 0.81% on Tuesday. Following a 0.48% loss on Monday, the USD/JPY ended the day at 147.471. The USD/JPY rose to a high of 148.832 before falling to a low of 147.321.

The Bank of Japan to Take Center Stage

On Tuesday, the Bank of Japan will be in the spotlight. BoJ Board Member Seiji Adachi is on the calendar to speak. Recent BoJ Governor Kazuo Ueda comments have fueled bets on the BoJ exiting negative rates. Comments favoring a pivot from an ultra-loose monetary policy stance could sink the USD/JPY.

While the markets are betting on the BoJ to tighten monetary policy, the bets are on a more dovish Fed rate path. Monetary policy divergence could deliver sizeable losses for the USD/JPY.

Inflation numbers from Japan support a BoJ pivot from negative rates. The national annual inflation rate accelerated from 3.0% to 3.3% in October.

US GDP and the Fed in Focus

On Wednesday, US GDP numbers for Q3 will draw investor interest. According to first estimate numbers, the US economy expanded by 4.9% in Q3. Revisions to the first estimate need consideration.

However, the devil will likely be in the details. Real disposable income and savings could be focal points as investors consider the economic outlook.

A decline in disposable income and savings may harm consumer spending. Negative consumer spending trends would ease demand-driven inflation and the need for a hawkish Fed rate path. However, a weaker consumer spending outlook could test the bets on a US soft landing. US private consumption contributes over 60% to the economy.

Beyond the numbers, Fed speakers will also draw investor interest. FOMC member Loretta Mester is on the calendar to speak. References to inflation and interest rates need consideration.

Short-term Forecast

Near-term trends for the USD/JPY remain tilted in favor of the Yen. The markets are betting on the Fed ending its rate hike cycle and pivoting to rate cuts. In contrast, investors expect the Bank of Japan to exit negative rates, swinging monetary policy divergence toward the Yen.

USD/JPY Price Action

Daily Chart

The USD/JPY remained below the 50-day EMA while holding above the 200-day, sending bearish near-term but bullish longer-term price signals.

A USD/JPY move through the 148.405 resistance level would bring the 50-day EMA into play. A break above the 50-day EMA would give the bulls a run at 150.

Bank of Japan board member commentary and the US economic calendar will be key focal points.

However, a fall through the 147 handle would bring the 146.649 support level into play. A drop below the 146.649 support level would give the bears a run at the trend line.

The 14-day RSI at 37.19 indicates a USD/JPY drop below 147 before entering oversold territory.

4-Hourly Chart

The USD/JPY remained below the 50-day and 200-day EMAs, sending bearish price signals.

A USD/JPY move to 148 would support a break above the 148.405 resistance level to target the 50-day EMA.

However, a drop below the 147 handle would bring the 146.649 support level support level into play.

The 14-period 4-hour RSI at 29.05 shows the USD/JPY in oversold territory. Buying pressure could intensify at 147.