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USD/JPY Forecast: The Jibun Bank Services PMI to Influence BoJ Pivot Bets

By:
Bob Mason
Published: Feb 22, 2024, 00:38 UTC

Key Points:

  • The USD/JPY gained by 0.19% on Wednesday, ending the session at 150.281.
  • On Thursday, private-sector PMIs from Japan will warrant investor interest.
  • Later in the session, the US Services PMI, jobless claims, and FOMC member speeches also need consideration.
USD/JPY Forecast

In this article:

USD/JPY Movement on Wednesday

The USD/JPY gained 0.19% on Wednesday. Reversing a 0.07% loss from Tuesday, the USD/JPY ended the day at 150.281. The USD/JPY fell to a low of 149.850 before rising to a Wednesday high of 150.393.

The Services PMI and Input Prices in Focus

On Thursday, private-sector PMIs for Japan will be under the spotlight. The Services PMI will impact the USD/JPY more, accounting for over 60% of the Japanese economy.

Economists forecast the Jibun Bank Services PMI to increase from 53.1 to 53.2 in February.

While the headline PMI figure will move the dial, investors must consider the prices sub-component. The Bank of Japan is eyeing the services sector to deliver much-needed demand-driven inflationary pressures to enable a pivot from negative rates. An upswing in labor market costs and a pickup in selling prices could support bets on an April Bank of Japan pivot from negative rates.

Beyond the numbers, investors must track BoJ commentary for views on interest rates and timelines to exit negative rates.

US Economic Calendar: Services, Jobless Claims, and Fed Speakers

On Thursday, private-sector PMI numbers for February will garner investor interest. The services sector accounts for over 70% of the US economy, giving the Services PMI more weightage.

Economists forecast the S&P Global Services PMI to fall from 52.5 to 52.0 in February. An unexpected increase in service sector activity could further delay Fed plans to cut interest rates. However, investors must look beyond the headline number, with job creation and prices being the focal points.

A pickup in labor costs could signal an upward trend in consumer spending and demand-driven inflation. A higher-for-longer Fed rate path could impact borrowing costs and reduce disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation.

Investors must also consider labor market data. Tight labor market conditions support wage growth and consumer spending. Economists forecast initial jobless claims to increase from 212k to 217k in the week ending February 17.

Following the FOMC Meeting Minutes, FOMC members could also move the dial. FOMC members Sarah Cook and James Jefferson are on the calendar to speak. Reactions to the recent inflation numbers, the Services PMI, and views on interest rate cuts need consideration.

Short-term Forecast

Near-term trends for the USD/JPY will likely hinge on the Services PMIs and central bank chatter. A pickup in price pressures across Japan’s services sector could fuel bets on an April BoJ pivot from negative rates.

USD/JPY Price Action

Daily Chart

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

A USD/JPY breakout from the 150.500 handle would support a move to the 151.889 resistance level.

Services PMIs, intervention warnings, and central bank chatter need investor consideration.

However, a break below the 150.201 support level would bring the 148.405 support level into play.

The 14-day RSI at 64.07 indicates a USD/JPY move to the 151 handle before entering overbought territory.

USD/JPY Daily Chart sends bullish price signals.
USDJPY 220224 Daily Chart

4-Hourly Chart

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

A USD/JPY return to the 151 handle would give the bulls a run at the 151.889 resistance level.

However, a break below the 150.201 support level and the 50-day EMA would bring the 148.405 support level into play.

The 14-period 4-hour RSI at 58.60 suggests a USD/JPY move to the 151.889 resistance level before entering overbought territory.

4-Hourly Chart affirms bullish price signals.
USDJPY 220224 4 Hourly 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.

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