USD/JPY Forecast: Economic Indicators, Central Banks, and Interventions

Highlights

• The USD/JPY declined by 0.16% on Wednesday, closing the session at 150.523.
• On Thursday, Q4 GDP numbers from Japan need consideration.
• Later in the session, the US labor market, US retail sales, and Fed speeches warrant investor attention.

USD/JPY Movement on Wednesday

The USD/JPY declined by 0.16% on Wednesday. Partially reversing a 0.96% rally from Tuesday, the USD/JPY ended the day at 150.523. The USD/JPY rose to a high of 150.781 before falling to a low of 150.345.

Q4 GDP Numbers, Interventions, and the Bank of Japan

On Thursday, the Japanese economy will be under the spotlight. GDP numbers for Q4 will garner investor interest. Economists forecast the economy to expand by 0.3% quarter-on-quarter after contracting by 0.7% in Q3. Year-over-year, economists expect the economy to grow by 1.4%. The economy contracted by 2.1% year-over-year in Q3.

However, investors must consider contributions to growth, with private consumption a likely focal point. The Bank of Japan requires a pickup in wage growth to fuel household spending and demand-driven inflation. Upward trends in wages and household spending would enable the BoJ to pivot from negative rates.

Economists forecast private consumption to increase by 0.1% quarter-on-quarter. In Q3, private consumption declined by 0.2%.

Other stats include finalized industrial production figures for December. However, these are likely to play second fiddle to the GDP Report.

Beyond the numbers, intervention threats to bolster the Yen and Bank of Japan chatter also need consideration.

US Economic Calendar: Fed Speeches, Retail Sales, and Jobless Claims

On Thursday, US jobless claims and retail sales figures will draw investor interest. Tighter labor market conditions and an unexpected rise in retail sales could impact bets on an H1 2024 Fed rate cut.

Economists forecast retail sales to decline by 0.1% in January and initial jobless claims to increase to 220k.

Tight labor market conditions 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 impact disposable income, curbing consumer spending.

Other stats include the Philly Fed Manufacturing Index and NY Empire State Manufacturing Index numbers. However, retail sales and labor market data will likely be the focal points.

Investors must also consider Fed speeches. FOMC members Raphael Bostic and Christopher Waller are on the calendar to speak. Further reactions to the US CPI Report and views on the timeline for Fed rate cuts would move the dial.

Short-term Forecast

Near-term trends for the USD/JPY hinge on economic indicators from Japan and the US, Fed chatter, and Bank of Japan forward guidance about an exit from negative rates. However, intervention threats also need consideration at current levels.

USD/JPY Price Action

Daily Chart

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

A USD/JPY return to the 151 handle would support a move to the 151.889 resistance level resistance level.

Economic data, central bank chatter, and intervention threats need consideration on Thursday.

However, a break below the 150.201 support level would bring the 148.405 support level into play.

The 14-day RSI at 66.98 suggests a USD/JPY move to the 151 handle before entering overbought territory.

4-Hourly Chart

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

A USD/JPY break above the Tuesday high of 150.884 would give the bulls a run at the 151.889 resistance level.

However, a drop below the 150.201 support level would support a fall to the 50-day EMA. A fall through the 50-day EMA would bring the 148.405 support level into play.

The 14-period 4-hour RSI at 65.70 suggests a USD/JPY return to 151 before entering overbought territory.