USD/JPY Forecast: Yen’s Tug-of-War with BoJ Speculation and US Housing News

Highlights

• USD/JPY faced a dip of 0.15%, post-Friday’s 0.25% gain, closing Monday at 147.604.
• BoJ and Fed decisions to dictate market moves.
• FOMC meeting anticipation grows; bullish outlooks might propel USD/JPY toward the 150 mark.

Monday Overview of USD/JPY Movements

On Monday, the USD/JPY declined by 0.15%. Following a 0.25% gain on Friday, the USD/JPY ended the day at 147.604. A range-bound session saw the USD/JPY rise to a high of 147.878 before falling to a low of 147.556.

Bank of Japan and Government Interventions

The market focus remains on the Bank of Japan today. Uncertainty shrouds the Friday monetary policy decision. Mixed signals from Board members have fueled speculation of a move away from negative rates.

In August, Board member Naoki Tamara talked about ending negative rates in 2024. Bank of Japan Ueda also discussed conditions under which the Bank of Japan would move away from its ultra-loose monetary policy stance. Governor Ueda needs to see a pickup in wage growth and a shift to demand-driven inflation.

However, recent wage growth and household spending figures disappointed, suggesting the status quo on Friday.

While the Yen remains at risk of further losses, the threat of government intervention lingers. The threat of intervention to provide Yen support continues to cap the upside for the USD/JPY.

US Housing Sector Takes Center Stage

The US housing sector will be in the spotlight this afternoon. Economists expect declines in housing starts and building permits in August. However, investors will likely brush aside modest falls. Housing sector stats are more volatile, with investors needing to consider trends. Nonetheless, a marked decline would influence investor sentiment.

Deteriorating housing sector conditions would affect consumer confidence. Waning consumer confidence would impact consumer spending and the US economy. US private consumption accounts for more than 65% of GDP.

While building permits and housing starts need consideration, the markets will remain focused on the Fed. The FOMC meeting commences today, with uncertainty about November lingering. Positive revisions to the FOMC economic projections would fuel bets on a November rate hike and a delay to the first Fed rate cut to 2025.

Short-term Forecast

The dollar remains in the driving seat despite the Monday pullback. Hawkish FOMC economic projections would bring 150 into view. A USD/JPY at 150 would likely force the Japanese government to intervene to bolster the Yen. However, Bank of Japan chatter about moving away from negative rates would change the USD/JPY trajectory in favor of the Yen.

USD/JPY Price Action

Daily Chart

The USD/JPY remained above the 146.649 support level. A USD/JPY rise through 148 would bring the 148.405 resistance level into play. However, failure to retake the 148 handle would give the bears a run at the 146.649 support level.

A break below the 146.649 support level would support a USD/JPY move toward the 144.894 support level.

The 60.50 14-Daily RSI indicates a USD/JPY move to the 148.405 resistance level before hitting overbought territory.

4-Hourly Chart

The USD/JPY hovers above the 50-day and 200-day EMAs, reaffirming bullish price signals. USD/JPY trends hinge on Fed and BoJ forward guidance this week. A break below the 50-day EMA would give the bears a run at the 146.649 support level.

However, a return to 148 would support a USD/JPY break above the 148.405 resistance level. A break above the 148.405 resistance level would bring the 150.293 resistance level into view.

The 54.29 14-4 Hourly RSI reading signals a USD/JPY move to the 148.405 resistance level before entering overbought territory.