The USD/JPY pair saw a 0.17% dip on Friday, closing the week at 149.554. Divergent monetary policies continue to play a pivotal role in shaping its movements. The Federal Reserve's hawkish stance favors the US dollar, pushing USD/JPY closer to the 151 mark, while the Bank of Japan's ultra-loose policy and negative rates remain a headwind for the Japanese Yen.
The Bank of Japan maintains its ultra-loose policy, with recent statements suggesting a continuation of the status quo in the near term. Wage growth in Japan remains a focal point for the BoJ, as recent figures indicate limited reasons to move away from negative interest rates. The consumer price inflation-wage growth dynamic is affecting consumer spending. A potential narrowing of this gap could bolster consumer spending and incentivize a shift away from negative rates.
Looking ahead, the New York Empire State Manufacturing Index will be closely monitored, with economists predicting a fall in October. Though the manufacturing sector accounts for less than a quarter of the US economy, its performance can still influence Fed policy decisions. Moreover, commentary from FOMC members, like Patrick Harker, will be pivotal. Harker's stance on interest rates could have a significant market impact.
The short-term forecast for USD/JPY is influenced by the ongoing monetary policy divergence. The pair seems poised to make a move towards 151, supported by favorable US policy. However, the looming threat of Yen interventions and the Middle East conflict provide a cushion against the downside. Forex traders will closely watch for better-than-expected US manufacturing data and hawkish Fed comments to boost USD demand. Conversely, a slump in US manufacturing activity and an escalation in global conflicts could weigh on USD/JPY.
In the realm of Forex trading, the USD/JPY's daily and 4-hourly charts reveal bullish signals. It has remained above the 50-day and 200-day EMAs, suggesting upward momentum. A break above the 150.293 resistance level could drive the pair further toward 151. However, a fall below the 148.405 support level would give the bears an opportunity to exert pressure. Forex traders should take note of the 14-day RSI, indicating the potential for USD/JPY to enter overbought territory, influencing trading decisions in the Forex market.