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USD/JPY Forecasts: Household Spending Surge Could Signal a More Hawkish BoJ Stance

By:
Bob Mason
Published: Apr 5, 2024, 00:00 GMT+00:00

Key Points:

  • On Friday, household spending numbers from Japan warranted investor attention.
  • Household spending increased by 1.4% in February, raising expectations of a more hawkish Bank of Japan rate path.
  • Later today, the US Jobs Report could affect investor bets on a June Fed rate cut.
USD/JPY Forecast

In this article:

Household Spending and the Bank of Japan

On Friday, household spending figures for February put the USD/JPY in focus. Household spending surged by 1.4% in February after sliding by 2.1% in January. Economists forecast household spending to rise by 0.5%.

Year-on-year, household spending was down 0.5% after declining 6.3% in January. Economists expected household spending to fall by 3.0% year-on-year.

While the household spending numbers were for February, wage growth accelerated in February. The February figures could give the Bank of Japan clues on the effect of wage growth on consumption in the current macroeconomic environment.

Investors expect the spring wage hikes to fuel household spending and demand-driven inflation. The Bank of Japan could raise interest rates to deliver price stability.

With household spending in focus, Bank of Japan commentary also needs consideration. Dovish comments could impact buyer demand for the Yen. A stronger USD/JPY may force the Japanese government to threaten an intervention.

US Economic Calendar: US Jobs Report and the Fed

On Friday, the all-important US Jobs Report will be in focus. Better-than-expected numbers could sink bets on a June Fed rate cut.

Economists forecast average hourly earnings to increase 4.1% year-on-year in March after rising 4.3% in February. Moreover, economists expect nonfarm payrolls to rise by 200k after a 275k increase in February. Economists predict the US unemployment rate to remain steady at 3.9%.

Wage growth remains a focal point as the Fed considers the effects of persistent inflation on the economy. However, a larger-than-expected increase in nonfarm payrolls could support wage growth. Higher wages could increase disposable income and fuel consumer spending and demand-driven inflation.

The Fed could delay the timeline for an interest rate cut to impact borrowing costs and reduce disposable income.

With the US Jobs Report in the spotlight, FOMC member speeches also need consideration. FOMC members Thomas Barkin, Susan Collins, and Michelle Bowman are on the calendar to speak. Reactions to the US Jobs Report and views on the timing to cut interest rates could move the dial.

Short-term Forecast

Near-term trends for the USD/JPY will depend on the US Jobs Report and Fed commentary. A hotter-than-expected US Jobs Report and hawkish Fed chatter could tilt monetary policy divergence toward the US dollar. However, intervention threats could leave the USD/JPY short of 152.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the 151.685 resistance level would support a move through the 152 barrier. However, the USD/JPY must break down resistance at the Wednesday high of 151.951.

The BoJ, intervention threats, the US Jobs Report, and FOMC member commentary need consideration.

Conversely, a USD/JPY drop below the 151 handle could give the bears a run at the 50-day EMA. A break below the 50-day EMA would bring the 148.529 support level into view.

The 14-day RSI at 58.64 indicates a USD/JPY break above the 152 barrier before entering overbought territory.

USD/JPY Daily Chart sends bullish price signals.
USDJPY 050424 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.

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