USD/JPY Forecast: Jibun Bank Services PMI and the Bank of Japan

By:

Updated: Apr 22, 2024, 22:55 UTC

Key Points:

On Tuesday, April 23, preliminary Jibun Bank Services and Manufacturing PMI numbers from Japan warrant investor attention.
Bank of Japan commentary needs consideration, with the services sector as the focal point.
Later in the session, US service sector PMI numbers could further influence sentiment toward the Fed interest rate trajectory.

Service Sector PMIs, Demand-Driven Inflation, and the Bank of Japan

On Tuesday, preliminary private sector PMI numbers warrant investor attention. Economists forecast the Jibun Bank Services PMI to slip from 54.1 to 54.0 in April. Moreover, economists predict the Jibun Bank Manufacturing PMI will decline from 48.2 to 48.0.

The Bank of Japan recently discussed the importance of the services sector vis-à-vis demand-driven inflation and the BoJ interest rate trajectory. Therefore, the Jibun Bank Services PMI will likely impact the USD/JPY more.

A pickup in service sector activity would likely raise investor expectations of a near-term interest rate hike. However, investors must consider the sub-components, including employment, prices, and new orders.

Following the March rate hikes, a translation into higher input prices, a more marked job creation rate, and rising new orders need consideration. Upward trends could incentivize the BoJ to begin rate hike discussions. The Bank of Japan will deliver its monetary policy decision on Friday, April 26.

Economists expect the Bank of Japan to leave interest rates at zero percent. Nevertheless, Bank of Japan Governor Kazuo Ueda may refer to the PMIs during the press conference.

US Economic Calendar: Services PMI and the Fed

On Tuesday, preliminary US private sector PMIs will garner investor interest amidst fading investor bets on multiple 2024 Fed rate cuts.

The Services PMI will likely affect the USD/JPY more, accounting for over 70% of the US economy. The services sector is a significant contributor to inflation. Chicago Fed President Austan Gooslbee recently highlighted the housing services sector as a stumbling block to returning inflation to target.

Economists forecast the S&P Global Services PMI to slip from 53.1 to 53.0 in April. An unexpected rise in the Services PMI could further impact investor expectations of a September Fed rate cut. However, investors must consider the sub-components, including prices and employment.

There are no Fed speeches to consider. The FOMC entered the blackout period on Saturday, April 20.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the Services PMIs. A pickup in service sector activity across Japan and upward employment and wage growth trends could fuel bets on a near-term BoJ move away from zero. In contrast, a better-than-expected US Services PMI could delay Fed rate cuts further. The USD/JPY could face selling pressure if the numbers from Japan beat forecasts.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered well above the 50-day and 200-day EMAs, confirming the bullish price trends.

A USD/JPY break above the April 22 high of 154.850 would support a move to the 155 handle.

Services PMIs and the Bank of Japan need consideration.

Conversely, a USD/JPY break below the 154 handle could give the bears a run at the 151.685 support level.

The 14-day RSI at 76.21 shows the USD/JPY in overbought territory. Selling pressure may increase at the April 22 high of 154.850.

USD/JPY Daily Chart sends bullish price signals.

USDJPY 230424 Daily 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.