USD/JPY Forecast: Price Analysis and Insights into Friday’s Market Moves

Highlights

• The USD/JPY declined by 0.73% on Thursday, ending the session at 141.835.
• Flash private sector PMIs from Japan will draw investor interest on Friday.
• Later in the Friday session, the US economic calendar will be the focal point.

USD/JPY Movements on Thursday

The USD/JPY declined by 0.73% on Thursday. Following a 1.77% tumble on Wednesday, the USD/JPY ended the day at 141.835. The USD/JPY rose to a high of 142.917 before falling to a low of 140.949.

Flash Private Sector PMIs and the Bank of Japan in Focus

On Friday, flash private sector PMIs from Japan warrant investor attention. A pickup in private sector activity could support bets on a Bank of Japan pivot from negative rates. Concerns about the macroeconomic environment have tempered investor expectations of a near-term exit from negative rates.

The Jibun Bank Services PMI will likely impact the buyer appetite for the Japanese Yen. Notably, the services sector accounts for over 60% of the economy. A pickup in service sector activity could give the Bank of Japan the grounds for more meaningful discussions about a move away from ultra-loose policy.

Economists forecast the Jibun Bank Manufacturing PMI to increase from 48.3 to 49.5. Significantly, economists predict the Jibun Bank Services PMI to rise from 50.8 to 52.0 in December.

Away from the economic calendar, Bank of Japan commentary also needs consideration.

US Private Sector Activity in the Spotlight

On Friday, US private sector PMI numbers will garner investor interest. The Services PMI accounts for over 70% of the economy and will likely dictate buyer demand for the USD/JPY.

A pullback in service sector activity would support the FOMC’s Fed Funds Rate projections for 2024. However, investors must consider sub-components of the PMI, including prices and employment. Softer price inflation and a less marked increase in hiring could pressure the USD/JPY.

Other stats include industrial production and NY Manufacturing Index numbers. However, these will likely play second fiddle to the PMI figures.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on US services PMI and the Bank of Japan. Discussions about an imminent move away from negative rates could support a USD/JPY drop below 140. Weaker-than-expected US service sector activity would also tilt monetary policy divergence toward the Yen.

USD/JPY Price Action

Daily Chart

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

A USD/JPY move through the 200-day EMA would bring the $144.713 resistance level into play.

US service sector activity and the Bank of Japan are focal points for the Friday session.

However, a break below the $142.177 support level would give the bears a run at the 139.359 support level.

The 14-day RSI at 31.52 suggests a USD/JPY fall through the 142.177 support level before entering oversold territory.

4-Hourly Chart

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

A USD/JPY move through the 143.500 handle would give the bulls a run at the 144.713 resistance level.

However, a drop below the 142.177 support level would support a fall to the 139.359 support level.

The 14-period 4-hour RSI at 35.80 suggests a USD/JPY fall below the 142.177 support level before entering oversold territory.