USD/JPY Forecast: Central Bank Dynamics, Intervention Threats, and 151

USD/JPY Movement on Thursday

The USD/JPY gained 0.16% on Thursday. Following a 0.19% rise on Wednesday, the USD/JPY ended the day at 150.520. The USD/JPY fell to a low of 150.015 before rising to a Thursday high of 150.687.

Bank of Japan, Intervention Threats, and the Emperor’s Birthday

On Friday, investors must monitor Bank of Japan commentary. Support for an April BoJ pivot from negative rates could impact buyer demand for the USD/JPY.

Bank of Japan Governor Kazuo Ueda spoke about inflation at a Parliamentary Committee meeting on Thursday. Significantly, Governor Ueda reportedly stated,

“We expect (prices) to continue to rise, just like last year and before.”

The comments suggested the BoJ brushed aside private sector PMI numbers for February. According to the preliminary survey, firms reported softer input and output price inflation. Significantly, the Bank of Japan sees the services sector as the source of demand-driven inflation.

The focus remains on the spring wage negotiations, with the BoJ banking on wage hikes to fuel household spending and demand-driven inflation.

However, a series of weaker-than-expected economic indicators have raised doubts about the BoJ exiting negative rates in April. A USD/JPY return to the 150 handle also reintroduced the threat of a government intervention to bolster the Yen.

On Thursday, Finance Minister Shunichi Suzuki warned that he is closely monitoring FX movements. The recent warnings could cap the upside for the USD/JPY.

There are no economic indicators for investors to consider on Friday. The markets in Japan are closed for the emperor’s birthday.

US Economic Calendar: Fed Speakers under the Spotlight

On Friday, investors must monitor FOMC member commentary throughout the day. Investor bets on the Fed cutting interest rates in March or May have receded. However, investors are raising bets on a 25-basis point June rate cut.

FOMC member calls for interest rates to stay higher for longer could test the theory of a June rate cut. Despite weaker service sector activity in February, economic indicators continue to signal a resilient US economy. Recent Fed speakers warned about cutting rates too early. Leading inflation indicators must show a sustained fall toward the target for the Fed to consider a rate cut.

Hopes of softer inflation trends have raised the bets on a June rate cut.

According to the CME FedWatch Tool, the probability of a 25-basis point June rate cut increased from 52.9% to 54.2% on Thursday. In contrast, the chances of a 25-basis point May rate cut fell from 30.6% to 20.3%.

There are no US economic stats for investors to consider on Friday.

Short-term Forecast

Near-term trends for the USD/JPY will likely hinge on central bank chatter. The Bank of Japan remains dependent on the spring wage negotiations to exit negative rates. US economic indicators continue to impact bets on an H1 2024 Fed rate cut. Weak data from Japan and robust numbers from the US could leave both central banks in wait-and-see mode and the USD/JPY at 150.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the 150.750 handle would give the bulls a run at the 151.889 resistance level.

Intervention warnings and central bank chatter need consideration.

However, a drop below the 150.201 support level would support a fall toward the 148.405 support level.

The 14-day RSI at 64.77 suggests a USD/JPY return to the 151 handle before entering overbought territory.

4-Hourly Chart

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

A USD/JPY move to the 151 handle would bring the 151.889 resistance level into play.

However, a fall through the 150.201 support level and the 50-day EMA would give the bears a run at the 148.405 support level.

The 14-period 4-hour RSI at 59.59 indicates a USD/JPY move to the 151.889 resistance level before entering overbought territory.