USD/JPY Forecast: BoJ, Japanese Government in Spotlight as 152 Barrier Holds

The Bank of Japan and the Japanese Government

On Thursday, investors should consider Bank of Japan forward guidance and Japanese government threats to intervene.

Recent BoJ views on the interest rate trajectory have pressured the Yen. BoJ Governor Kazuo Ueda reiterated the need to support the economy for the BoJ to achieve its 2% inflation target.

Market expectations of the BoJ holding interest rates at zero leave interest rate differentials firmly favoring the US dollar. The outlook for carry trades also favors the greenback, supporting the USD/JPY at current levels.

In contrast, the Japanese government remains committed to preventing further Yen weakness. The line in the sand remains the USD/JPY at 152. A break above 152 could force the Japanese government to deliver on threats to bolster the Yen.

The dynamic could change once the spring wage hikes translate into household spending. An upward trend in household spending could fuel demand-driven inflationary pressures. The BoJ could respond by raising interest rates to deliver price stability at the 2% inflation target.

There are no economic indicators from Japan for investors to consider on Thursday. The lack of stats will leave the BoJ-government dynamic to influence morning trends.

US Economic Calendar: US Jobless Claims and FOMC Member Speeches

On Thursday, the weekly US jobless claims numbers will garner investor interest. After the March ADP Report, an unexpected slide in jobless claims could impact bets on a June Fed rate cut.

Tighter labor market conditions could support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. A higher-for-longer Fed rate path could reduce disposable income. Consumers could curb consumption, easing demand-driven inflationary pressures.

Economists forecast initial jobless claims to increase from 210k to 214k in the week ending March 30.

With the US labor market in focus, Fed speeches also need monitoring. FOMC members Thomas Barkin, Michelle Bowman, Austan Goolsbee, Loretta Mester, and Adriana Kugler are on the calendar to speak. Views on inflation, the US economy, and the interest rate trajectory could move the dial.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the US Jobs Report and central bank chatter. A hotter-than-expected US Jobs Report and hawkish Fed chatter could tilt monetary policy divergence toward the USD dollar. However, tighter US labor market conditions could force the Japanese government to intervene to bolster the Yen. 152 remains the near-term USD/JPY cap.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered comfortably above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY break out from the 151.685 resistance level could give the bulls a run at the 152 handle. The USD/JPY must break down resistance at the Wednesday high of 151.951 to breach the 152 barrier.

The BoJ, the Japanese government, US labor market data, and the Fed need consideration.

Conversely, a USD/JPY drop below the 151.500 handle could signal a fall through the 150 handle. A break below 150 would bring the 50-day EMA into play.

The 14-day RSI at 63.77 suggests a USD/JPY break above the 152 barrier before entering overbought territory.