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USD/JPY Forecast: FOMC Meeting Minutes in Focus Amid Rising Bets on a BoJ Pivot

By:
Bob Mason
Published: Nov 21, 2023, 00:38 UTC

Pay hike forecasts ignite expectations of the BoJ exiting negative rates. Monetary policy divergence will shape short-term USD/JPY forecast.

USD/JPY Forecast

In this article:

Highlights

  • The USD/JPY slid by 0.76% on Monday, ending the session at 148.359.
  • Expectations of Japanese firms delivering another substantial round of pay hikes fueled hawkish bets on the Bank of Japan.
  • On Tuesday, the FOMC Meeting Minutes will be a focal point.

USD/JPY Movements on Monday

The USD/JPY slid by 0.76% on Monday. Following a 0.81% loss on Friday, the USD/JPY ended the session at 148.359. The USD/JPY rose to a high of 149.989 before falling to a low of 148.102.

Wage Hike Expectations Raise Bets on a BoJ Exit from Negative Rates

Expectations of another round of substantial pay hikes raised bets on the Bank of Japan exiting negative rates. Unions, Japanese companies, and economists expect significant pay hikes in 2024. Pay hikes in 2023 were reportedly the largest in over 30 years.

Another round of significant pay hikes would fuel consumer spending and demand-driven inflation. Demand-driven inflation would allow the BoJ to exit negative rates. An upward trend in consumer price inflation has pressured the BoJ to pivot from negative rates.

However, concerns about the macroeconomic environment have delayed a pivot from ultra-loose. Another jump in wages could be enough for the BoJ.

On Tuesday, Bank of Japan commentary needs consideration. Hawkish speeches would support the USD/JPY move toward 145. Expectations of an exit from negative rates and bets on Fed rate cuts are impacting the USD/JPY.

There are no economic indicators from Japan for investors to consider on Tuesday.

Fed Speakers and the FOMC Meeting Minutes in Focus

On Tuesday, US existing home sales figures and the Chicago Fed National Activity Index will draw investor interest. Upbeat numbers could offer brief relief to the US dollar. However, the FOMC Meeting Minutes and Fed speakers will likely drive sentiment toward the US dollar.

The FOMC Meeting Minutes could reveal focal points beyond inflation. While inflationary pressures eased in October, labor market conditions remain tight. A pickup in wage growth could force the Fed to reconsider hitting the brakes on its rate hike cycle.

A pickup in wage growth would increase disposable income and fuel consumer spending and demand-driven inflation. A more hawkish Fed rate path would raise borrowing costs and lower disposable income, dampening consumer spending and demand-driven inflation.

With the markets betting on a May Fed rate cut, the minutes must be sufficiently hawkish to create policy uncertainty. Notably, policy uncertainty may ease bets on a Fed rate cut if the Fed has considerations beyond headline inflation.

Short-term Forecast

Recent economic indicators and central bank speeches tilted monetary policy divergence toward the Yen. Near-term trends for the USD/JPY will hinge on BoJ and Fed speakers. Dovish Fed speakers and hawkish BoJ guidance would support a USD/JPY move toward 145.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the 148.405 resistance level would support a move to the 50-day EMA. A move through the 50-day EMA would send bullish price signals.

US economic indicators and the FOMC Meeting Minutes will be focal points.

Failure to break above the 148.405 resistance level would bring the 146.649 support level into view. Dovish FOMC Meeting Minutes could fuel a USD/JPY sell-off.

The 14-day RSI at 40.27 indicates a USD/JPY drop below 148 before entering oversold territory.

USD/JPY Daily Chart sends bearish near-term price signals.
USDJPY 211123 Daily Chart

4-Hourly Chart

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

A USD/JPY drop below 148.000 would support a move toward the 146.649 support level.

However, a break above the 148.405 resistance level would support a move toward the 200-day EMA.

The 14-period 4-hour RSI at 25.12 shows the USD/JPY in oversold territory. Buyer appetite could intensify at the 148.405 resistance level.

4-Hourly Chart EMAs affirm bearish near-term price signals.
USDJPY 211123 4-Hourly Chart

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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