USD/JPY Forecast: BoJ Pivot Chatter and US Jobless Claims in Focus

Highlights

• The USD/JPY rose by 0.11% on Wednesday, ending the session at 147.309.
• Uncertainty about the timing of a Bank of Japan pivot from negative rates lingered on Wednesday.
• On Thursday, US labor market numbers will be the focal point.

USD/JPY Movements on Wednesday

The USD/JPY gained 0.11% on Wednesday. After a 0.04% loss on Tuesday, the USD/JPY ended the day at 147.309. The USD/JPY fell to a low of 146.894 before rising to a session high of 147.498.

Bank of Japan Pivot Speculation to Continue

This week, commentary surrounding Bank of Japan plans to exit negative rates continued to draw investor interest. On Wednesday, BoJ Deputy Governor Ryozo Himino discussed the benefits of pivoting from negative rates, saying,

“If this is done properly, we could achieve a positive outcome from the exit because a wide range of households and firms would benefit from rising wages and prices.”

In contrast, BoJ Board members recently supported ultra-loose policy, playing down a BoJ pivot. Mixed signals and economic indicators from Japan have slowed the Yen’s progress toward 145 against the US dollar.

Tokyo inflation softened by more than expected in November. The annual inflation rate eased from 3.3% to 2.6%.

US Initial Jobless Claims in Focus

On Thursday, US jobless claims will warrant investor attention. After the weaker-than-expected ADP numbers, a marked increase in claims could reinforce bets on a Q1 2024 Fed rate cut.

A deteriorating labor market could affect wage growth, disposable income, and consumer confidence. The net effect would be a pullback in consumer spending, dampening demand-driven inflationary pressures. A softer inflation outlook would support the need for a less hawkish Fed rate path.

Economists forecast initial jobless claims to increase from 218k to 222k in the week ending December 2.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on household spending numbers from Japan (Fri) and the US Jobs Report (Fri). A pickup in household spending and softer US wage growth would drive monetary policy divergence toward the Yen.

USD/JPY Price Action

Daily Chart

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

A USD/JPY move to the 147.500 handle would bring the 148.405 resistance level and the 50-day EMA into play. Selling pressure could intensify at 148.400. The 50-day EMA is confluent with the 148.405 resistance level.

Bank of Japan commentary and US labor market stats are focal points on Thursday.

However, a fall through the trend line and the 146.649 support level would bring the 144.713 support level into view.

The 14-day RSI at 40.56 suggests a USD/JPY fall to through the 146.649 support level before entering oversold territory.

4-Hourly Chart

The USD/JPY held below the 50-day and 200-day EMAs, reaffirming bearish near-term price signals.

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

However, a fall through the trend line would give the bears a run at the 146.649 support level.

The 14-period 4-hour RSI at 49.52 suggests a USD/JPY break below the 146.649 support level before entering oversold territory.