USD/JPY Forecast: Price Shifts Amid Beijing Stimulus Speculation and Yen Dynamics

Highlights

• USD/JPY declined by 0.32% Friday but finished the week higher by 0.30% at 145.365.
• Investors anticipate Beijing’s next steps; a major stimulus could favor riskier assets.
• The Jackson Hole Symposium looms large; the market awaits clarity on Fed rate intentions.

Friday Overview

On Friday, the USD/JPY fell by 0.32% to end the week up 0.30% to 145.365. The USD/JPY rose to a first-hour high of 145.794 before falling to a late-session low of 144.926. Despite finding late support, the USD/JPY saw red for the second consecutive session.

A Quiet Economic Calendar Leaves China and the BoJ in Focus

It is a quiet start to the week, with no economic indicators from Japan or China to rock the boat. The light economic calendar puts China and central bank monetary policy in the spotlight.

The PBoC will set loan prime rates (LPR) this morning as investors await more convincing stimulus moves from Beijing. Economists expect the PBoC to cut the one-year LPR by 15 basis points to 3.40% and the five-year LPR by 15 basis points to 4.05%.

A more aggressive move and stimulus talk from Beijing would fuel demand for riskier assets at the expense of the Yen. However, the threat of interventions to support the Yen will likely limit a material leg up for the USD/JPY as investors await the Jackson Hole Symposium.

Jackson Hole Symposium Comes into View

It is a quiet Monday session on the US economic calendar. There are no US economic indicators to influence, leaving the USD/JPY in the hands of central bank chatter this afternoon.

While the FOMC meeting minutes left the door open to further rate hikes, uncertainty lingers about whether the Fed will hike rates in September. The Jackson Hole Symposium may remove the market uncertainty, which pulled the USD/JPY back to sub-146.

With the Jackson Hole Symposium in focus, we expect USD/JPY sensitivity to Fed chatter. Downside risks linger for the dollar, with dovish commentary likely to unwind bets on a higher-for-longer US interest rate path trajectory.

USD/JPY Price Action

Daily Chart

The Daily Chart showed the USD/JPY hovering above the 145.0 – 144.3 support band. Despite the second session in the red on Friday, the USD/JPY held above 50-day and 200-day EMAs, sending bullish near and longer-term price signals.

Looking at the 14-Daily RSI, 62.02 reflects bullish sentiment, supporting a run at 146 and the 146.6 – 147.3 resistance band. However, a USD/JPY fall through the upper level of the 145.0 – 144.3 support band would bring sub-144 into play.

4-Hourly Chart

Looking at the 4-Hourly Chart, the USD/JPY faces strong resistance at 145.5. The USD/JPY holds above the 145.0 – 144.3 support band and the 50-day and 200-day EMAs, affirming the bullish near and longer-term price signals.

The 14-4H RSI reading of 46.36 reflects bearish sentiment, with selling pressure outweighing buying pressure. The RSI signals a fall through the 50-day EMA and the 145.0 – 144.3 support band to bring sub-144 into view. However, avoiding the 145.0 – 144.3 support band and the 50-day EMA would bring 146 and the 146.6 – 147.3 resistance band into play.