USD/JPY Forecast: Intervention Looms as Prices Approach 150

Highlights

• USD/JPY witnessed a mid-week surge, touching highs of 149.707, fueled by contrasting monetary policy stances.
• The looming specter of a Yen intervention at 150 stands as a potential restraint on USD’s bullish rally.
• US Q2 GDP and jobless claims become pivotal, with the Fed’s hawkish undertone set to influence the US dollar.

Wednesday Overview of USD/JPY Movements

On Wednesday, the USD/JPY gained 0.38%. Following a 0.12% rise on Tuesday, the USD/JPY ended the day at 149.626. The USD/JPY fell to a low of 148.859 before rising to a Wednesday high of 149.707.

Intervention at 150?

The Japanese Yen continued to lose ground against the US dollar despite the ever-present threat of an intervention. A dovish Bank of Japan monetary policy outlook continues to resonate amidst hawkish Fed bets.

Economic indicators from Japan support the dovish stance. Household spending and wage growth may leave interest rates in negative territory over the near term. Bank of Japan Governor Ueda stated the need for wage growth and demand-driven inflation to support a move away from negative rates.

While the Yen remains under pressure, an intervention to bolster the Yen could materialize at 150. The threat of an intervention may limit the upside before the US session.

US Jobless Claims to Justify Hawkish Fed Bets

US Q2 GDP and jobless claims figures will garner investor interest later today. The market focus on the US Federal Reserve is unlikely to waiver. An unexpected fall in jobless claims would raise the bets on further Fed interest rate hikes and erase the hope of a 2024 rate cut.

Investors will likely accept a modest increase in jobless claims. Sub-220k is still reflective of tight labor market conditions. US Q2 GDP numbers are unlikely to influence appetite for the US dollar, barring a sharp revision from prelim figures.

Tight labor market conditions support wage growth and an increase in disposable incomes. A pickup in disposable income would fuel consumption and demand-driven inflationary pressures. However, higher interest rates would impact wage growth and force consumers to curb spending. A pullback in spending would ease demand-driven inflationary pressures.

FOMC member commentary also needs consideration. A shift away from the higher-for-longer interest rate path would dampen demand for the US dollar.

Short-term Forecast

Macroeconomic and monetary policy divergence supports further USD/JPY gains. However, a return to 150 may leave investors wary of an intervention. A spike in US jobless claims and softer US inflation numbers on Friday would likely support a USD/JPY pullback to sub-148.

USD/JPY Price Action

Daily Chart

The USD/JPY remained above the 50-day and 200-day EMAs, sending bullish price signals. A USD/JPY move through the Wednesday high of 149.707 would give the bulls a run at the 150.293 resistance level. An unexpected fall in US jobless claims would support another breakout session.

However, a spike in jobless claims will support a USD/JPY return to sub-149. A fall to sub-149 will bring the 148.405 support level into play.

The 66.38 14-Daily RSI indicates a USD/JPY move to 150 before entering overbought territory.

4-Hourly Chart

The USD/JPY hovers above the 50-day and 200-day EMAs, reaffirming the bullish price signals. A USD/JPY return to 150 will support a run to the 150.293 resistance level.

However, a fall to sub-149 will bring the 148.405 support level and the 50-day EMA into play. Buying pressure may intensify at 148.409. The 50-day EMA is confluent with the 148.405 support level. A break below the 148.405 support level and the 50-day EMA may give the bears a look at sub-148.

The 70.49 14-4 Hourly RSI shows the USD/JPY in the overbought territory.