USD/JPY Forecast: Japan Machinery Orders and BoJ Pivot Bets

Highlights

• The USD/JPY gained 0.65% on Wednesday, ending the session at 148.142.
• US retail sales contributed to the gains on Wednesday.
• On Thursday, machinery orders from Japan, US economic data, and Fed speakers warrant investor attention. 

USD/JPY Movement on Wednesday

The USD/JPY gained 0.65% on Wednesday. Following a 1.03% rally on Tuesday, the USD/JPY ended the session at 148.142. The USD/JPY fell to a low of 147.053 before rising to a session high of 148.526.

Machinery Orders and the Bank of Japan in Focus

On Thursday, machinery orders from Japan will garner investor interest. Weaker-than-expected numbers would ease pressure on the Bank of Japan to exit negative rates. The Bank of Japan signaled the need for caution in December, citing economic uncertainties.

Economists forecast machinery orders to fall by 0.8% in November after orders rose by 0.7% in October.

Beyond the numbers, investors must consider Bank of Japan commentary. References to inflation and negative interest rates would move the dial.

US Jobless Claims and Fed Speakers in the Spotlight

On Thursday, the US weekly jobless claims warrant investor attention. An unexpected spike in jobless claims could raise bets on a March Fed rate cut. Weaker labor market conditions could affect wage growth and reduce disposable income. Downward trends in disposable income would curb spending and dampen demand-driven inflation.

Economists forecast initial jobless claims to increase from 202k to 207k in the week ending January 13. Sub-210k claims would unlikely influence sentiment toward Fed monetary policy.

Other stats include the Philly Fed Manufacturing Index and housing sector-related data. However, barring weak numbers, the US labor market will likely be the focal point.

Beyond the numbers, FOMC member commentary needs consideration. FOMC member Raphael Bostic is on the calendar to speak on Thursday.

Short-term Forecast

Near-term USD/JPY trends hinge on inflation numbers from Japan and Fed speakers. Softer inflation numbers from Japan and less dovish FOMC member chatter would drive demand for the USD/JPY. A return to 150 is not unthinkable.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the 148.405 resistance level would support a move toward the 150.201 resistance level.

On Thursday, machinery orders from Japan, the US jobless claims, and central bank commentary need consideration.

However, a fall through the 147.500 handle would bring the 146.649 support level into play. A break below the 146.649 support level would give the bears a run at the 50-day EMA.

The 14-day RSI at 65.68 suggests a USD/JPY break above the 148.405 resistance level before entering overbought territory.

4-Hourly Chart

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

A USD/JPY breakout from the 148.405 resistance level would give the bulls a run at the 150.201 resistance level.

However, a drop below the 147.500 handle would bring the 146.649 support level into play.

The 14-period 4-hour RSI at 77.93 shows the USD/JPY in overbought territory. Selling pressure could intensify at the 148.405 resistance level.