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The Bank of Japan Governor spoke on Wednesday, setting the stage for a possible pivot from ultra-loose. The Governor reportedly said,
“[…] In terms of how long we maintain our massive monetary easing… real wages don’t necessarily have to turn positive before that decision is made. The decision could be made If we can foresee with some uncertainty that real wages will turn positive ahead.”
The Bank of Japan Governor had previously spoken about the need for wage growth and demand before exiting ultra-loose.
A more detailed outline of policy goals will influence the investor appetite for the Yen. Intervention warnings to bolster the Yen may resurface with the USD/JPY returning to 151. There are no economic indicators from Japan to influence the USD/JPY trends.
Fed Chair Jerome Powell and the US Labor Market in the Spotlight
On Thursday, the US labor market will be in focus again. Tight labor market conditions support wage growth and disposable income.
An upward trend in disposable income could fuel private consumption and demand-driven inflation. A more hawkish Fed rate path would raise borrowing costs, affecting disposable income and consumption. Softer consumption would ease demand-driven inflationary pressures.
Economists forecast initial jobless claims to increase from 217k to 218k in the week ending November 4. An unexpected spike in claims could further erase bets on a Fed rate hike.
Beyond the numbers, Fed commentary warrants consideration. Fed Chair Powell will speak, with FOMC non-voting members Raphael Bostic and Thomas Barkin also delivering speeches. Fed Chair Powell will be the focal point.
Recent Unit labor costs and the US Jobs Report raised bets on the Fed ending its rate hike cycle. References to the US labor market, inflation, and the interest rate path need considering.
Short-term Forecast
Central bank speeches will continue to dictate near-term trends for the USD/JPY. Bank of Japan plans to pivot from an ultra-loose policy, and a dovish Fed could support a gradual move toward 145.
USD/JPY Price Action
Daily Chart
The USD/JPY remained above the 50-day and 200-day EMAs, reaffirming bullish price signals. A USD/JPY move to 151 would give the bulls a run at the 151.889 resistance level.
Bank of Japan Governor Ueda and Fed Chair Powell will be the focal points on Thursday.
A fall through the 150.201 support level would bring the 50-day EMA and the 148.405 support level into play.
The 14-day RSI at 57.86 indicates a USD/JPY move to the 151.889 resistance level before entering overbought territory.
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