USD/JPY Forecast: Intervention News and US Job Figures to Shape the Trend

Highlights

• The USD/JPY gained 0.09% on Wednesday, hitting a 149.317 session high before easing back to end the day at 149.125.
• Recent ADP data showed an 89k nonfarm employment uptick, stirring market concerns.
• Increasing US jobless claims might disrupt the expected hawkish Fed rate trajectory.

Wednesday Overview of USD/JPY Movements

On Wednesday, the USD/JPY gained 0.09%. Following a 0.58% loss from Tuesday, the USD/JPY ended the day at 149.125. The USD/JPY rose to a high of 149.317 before falling to a low of 148.734.

Intervention Chatter Dominates the FX News Wires

Intervention-related news will remain a focal point on Thursday morning. Softer ADP nonfarm figures from the US eased buyer appetite for the USD/JPY. However, macroeconomic and monetary policy divergence supports further US dollar gains.

10-year government bond yields will provide direction early in the Asian session. However, household spending figures from Friday will influence the Bank of Japan (BoJ) and its ultra-loose policy stance.

The BoJ recently signaled a willingness to shift from negative rates should wage growth accelerate and fuel demand-driven inflation.

Economists forecast household spending to increase by 0.9% in August vs. a 2.7% slide in July. However, lackluster wage growth continues to weigh on consumption.

Post US ADP Nonfarm Sensitivity to US Jobless Claims

US initial jobless claims will garner plenty of investor interest on Thursday. On Wednesday, the ADP reported an 89k increase in nonfarm employment vs. a 180k rise in July. The softer-than-expected figure will likely fuel fears of weaker US labor market conditions.

Economists forecast initial jobless claims to increase from 204k to 210k. A spike above 220k could make investors jittery before the US Jobs Report.

Weaker labor market conditions may soften wage growth pressures and consumer spending. A pullback in consumption would likely ease demand-driven inflation and the need for a hawkish Fed rate path.

However, comments from FOMC members also need consideration. FOMC Members on the calendar to speak include Michael Barr, Thomas Barkin, Mary Daly, and Loretta Mester. Voting member Michael Barr will likely draw more interest.

Short-term Forecast

Macroeconomic and monetary policy divergence remains tilted in favor of the US dollar. However, softer wage growth and a rise in the US unemployment rate would be USD/JPY bearish.

USD/JPY Price Action

Daily Chart

The USD/JPY sat above the 50-day and 200-day EMAs, affirming bullish price signals. A return to 150 would support a USD/JPY move to the 150.293 resistance level.

A modest increase in US jobless claims and hawkish Fed comments would support a breakout session.

However, an unexpected spike in initial jobless claims and more cautious Fed comments would support a move to the 148.405 support level. The ever-present threat of an intervention to bolster the Yen remains a near-term headwind.

The 14-day RSI at 59.30 indicates a USD/JPY move to the 150.293 resistance level before entering overbought territory.

4-Hourly Chart

The USD/JPY sites below the 50-day EMA while holding above the 200-day EMA, sending bearish near-term but bullish longer-term price signals. A USD/JPY break above the 50-day EMA would support a move to the 150.293 resistance level.

However, a failure to break above the 50-day EMA would give the bears a run at the 148.405 support level.

The 42.74 14-4 Hourly RSI signals a USD/JPY move to the 148.405 support level before entering oversold territory.