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In the week ending April 26, 2024, the USD/JPY witnessed a notable surge of 2.38%, closing at 158.283 after a rollercoaster ride from a Monday low of 154.441 to a Friday high of 158.437.
USD/JPY Analysis: Retail Sales, Unemployment, and the Bank of Japan
Investor focus for the week of April 30 is drawn towards pivotal labor market data and retail sales figures. The Bank of Japan (BoJ) remains keen on monitoring wage growth and household spending to fuel demand-driven inflation.
Economists anticipate a decline in the unemployment rate from 2.6% to 2.5% in March, with the jobs/applications ratio expected to hold steady at 1.26. Additionally, retail sales are forecasted to witness a year-on-year increase of 2.6% in March, following a 4.6% rise in February.
The Japanese Yen’s strength could find support in better-than-expected data, although market reactions may hinge on the BoJ’s response to any positive numbers.
Finalized Manufacturing PMI numbers for April will be closely watched on May 1, particularly focusing on sub-components like prices, employment, and new orders. The BoJ’s interest may pique in response to an improving demand environment.
The release of monetary policy meeting minutes from the March meeting on May 2, although dated, could shed light on discussions surrounding interest rate adjustments.
US Economic Calendar: US Labor Market, the ISM Services PMI, and the Fed
Attention shifts to the US economic calendar, where the Dallas Fed Manufacturing Index on April 29 and employment cost data on April 30 set the stage.
An increase in employment costs, coupled with consumer confidence figures, could shape expectations regarding the Federal Reserve’s rate trajectory.
On May 1, labor market indicators like ADP employment and JOLTs Job Openings will take precedence, with positive numbers potentially fueling wage growth and consumer spending.
May 2 sees the release of unit labor costs, nonfarm productivity, and initial jobless claims data, offering insights into labor market dynamics.
Closing out the week on May 3, the spotlight falls on the US Jobs Report and ISM Services PMI numbers, both of which hold significance in shaping investor sentiment towards Fed rate cuts.
The Fed Interest Rate Decision and Press Conference
Amidst fading expectations of multiple Fed rate cuts in 2024, the Fed’s interest rate decision on May 1 and subsequent press conference carry weight in guiding market sentiment.
Short-term Forecast
Near-term trends for USD/JPY hinge on a plethora of economic indicators, central bank decisions, and intervention prospects. The currency pair’s trajectory may be influenced by the interplay of US labor market dynamics, Fed commentary, and Japanese government interventions.
USD/JPY Price Action
The USD/JPY maintains a bullish stance, supported by its position above key moving averages. A breach of the 158.5 handle could pave the way for further upside towards 160.
Conversely, a dip below 155 could invite bearish sentiment, targeting the 50-day EMA and the 151.685 support level.
The 14-day RSI signals overbought conditions, suggesting potential selling pressure near the 160 mark.
