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USD/JPY Forecast: Dovish Divergence Fuels Price Movement News

By:
Bob Mason
Updated: Sep 26, 2023, 21:37 GMT+00:00

Today's focus remains on the Bank of Japan’s monetary policy minutes and potential revelations about a shift away from negative rates impacting the Japanese Yen.

USD/JPY Forecast

In this article:

Highlights

  • The USD/JPY gained by 0.12% on Tuesday to end the session at 149.055.
  • While monetary policy divergence tilts in favor of the US dollar, intervention risks continue to peg the USD/JPY back from 150.
  • The BoJ Monetary Policy Meeting Minutes and US Core Durable Goods Orders could tip the balance today.

Tuesday Overview of USD/JPY Movements

On Tuesday, the USD/JPY rose by 0.12%. Following a 0.35% gain on Monday, the USD/JPY ended the day at 149.055. The USD/JPY declined to a low of 148.704 before rising to a Tuesday high of 149.186.

Bank of Japan Monetary Policy Meeting Minutes in Focus

The Bank of Japan monetary policy meeting minutes from the July meeting will be in focus today. While dated, the minutes may reveal a more hawkish outlook and plans to shift away from negative rates before reining in the expectations of a policy shift in September.

A shift in the macroeconomic environment and sticky inflation suggests a continuation of ultra-loose over the near term. However, investors should consider any language that may remain relevant and signal a policy move.

Plans to hold monetary policy in an ultra-loose state would support the bearish USD/JPY trend.

The Bank of Japan needs a wage growth and demand-driven inflation mix to move away from negative rates. However, recent economic indicators support the dovish stance and the USD/JPY move toward 150.

US Core Durable Goods: An Afterthought for Inflation-Hungry Investors

Later today, US core durable goods orders will draw investor interest. Economists forecast core durable goods orders to increase by 0.1% in August versus a 0.5% rise in July.

While production figures garner investor interest, the Fed may not factor the numbers into its policy intentions. The manufacturing sector contributes 20% to GDP and has a significantly reduced inflationary effect compared with the services sector.

Nonetheless, weaker-than-forecasted figures would fuel fears of a US hard landing.

Beyond the numbers, FOMC member speeches also need consideration. Dovish comments about the economy and monetary policy would catch investors by surprise and dampen demand for the US dollar.

Short-term Forecast

Economic and monetary policy divergence remains tilted toward the US dollar. However, the US dollar is at risk of a sharp reversal should economic indicators begin to show more cracks. Nonetheless, 150 remains the target.

USD/JPY Price Action

Daily Chart

The USD/JPY held above the 50-day and 200-day EMAs, sending bullish price signals. A USD/JPY return to the Tuesday high of 149.186 would support a move toward the 150.293 resistance level. Better-than-expected core durable goods orders and hawkish Fed comments would support a breakout.

However, weak US numbers or Japanese government threats of an intervention would support a break below the 148.405 support level. A fall through the 148.405 support level would give the bears a run at sub-147.500.

The 65.41 14-Daily RSI supports a USD/JPY move to the 150.293 resistance level before entering overbought territory.

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4-Hourly Chart

The USD/JPY remains above the 50-day and 200-day EMAs, reaffirming the bullish price signals. A USD/JPY move through 149.186 would support a run at the 150.293 resistance level.

However, a fall through the 148.405 support level would bring the 50-day EMA into play. A break below the 50-day EMA would give the bears a look at sub-147.500.

The 69.42 14-4 Hourly RSI leaves the USD/JPY on the overbought territory border.

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About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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