USD/JPY Forecast: The BoJ, The Fed, and US Labor Market Data in Focus

Highlights

• The USD/JPY gained 0.16% on Wednesday, ending the session at 148.172.
• Hawkish Fed commentary drove buyer demand for the USD/JPY.
• On Thursday, the Bank of Japan, the Fed, and the US labor market need consideration.

USD/JPY Movement on Wednesday

The USD/JPY gained 0.16% on Wednesday. Partially reversing a 0.49% loss from Tuesday, the USD/JPY ended the day at 148.172. The USD/JPY rose to a high of 148.256 before falling to a low of 147.614.

Current Account Numbers and the Bank of Japan

On Thursday, bank lending and current account numbers will draw interest. Economists forecast bank lending to increase by 3.2% year-on-year in January compared to 3.1% in December. A pickup in bank lending could signal a pickup in economic activity. Demand for bank loans tends to align with upward trends in business confidence and economic activity.

However, economists expect the current account surplus to narrow from Yen 1,925.6 billion to Yen 1,018.9 billion. A more marked narrowing in the current account surplus could influence buyer demand for the Japanese Yen.

Beyond the numbers, investors must consider Bank of Japan commentary. The markets are betting on a Bank of Japan pivot from negative rates in Q2 2024. Wage growth negotiations in March remain the focal point for board members. The expectations of a Bank of Japan pivot continues to cap the upside for the USD/JPY. A more dovish timeline could impact the buyer appetite for the Yen.

US Labor Market and the Fed

On Thursday, the US labor market will be in focus. Economists forecast initial jobless claims to decline from 224k to 220k in the week ending February 3. A more marked decline could influence bets on a March Fed rate cut.

Tighter labor market conditions could support wage growth and increase disposable income. Higher disposable income could fuel consumer spending and demand-driven inflation. A higher-for-longer Fed rate path could impact borrowing costs and disposable income. The net effect could be a pullback in consumer spending and softer demand-driven inflationary pressures.

Beyond the numbers, FOMC member speeches also need consideration. FOMC voting member Thomas Barkin is on the calendar to speak on Thursday. A deviation from a traditionally hawkish stance would move the dial. On Wednesday, Barkin called for patience on cutting interest rates.

Short-term Forecast

Near-term trends for the USD/JPY hinge the Bank of Japan forward guidance and US economic data. A deterioration in the US economy and a more assertive Bank of Japan guidance on exiting negative rates could impact the USD/JPY.

USD/JPY Price Action

Daily Chart

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

A USD/JPY breakout from the 148.405 resistance level would bring the 150.201 resistance level into play.

On Thursday, Bank of Japan commentary, Fed speakers, and the US labor market warrant investor attention.

However, a break below the 147.500 handle would support a fall toward the 146.649 support level and the 50-day EMA. Selling pressure could intensify at the 146.649 support level. The 50-day EMA is confluent with the 146.649 support level.

The 14-day RSI at 57.45 indicates a USD/JPY move to the 150.201 resistance level before entering overbought territory.

4-Hourly Chart

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

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

However, a break below the 50-day EMA would support a fall toward the 200-day EMA and the 146.649 support level.

The 14-period 4-hour RSI at 51.29 indicates a USD/JPY move to the 150.201 resistance level before entering overbought territory.