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USDJPY Forecast: Yen Strengthens Ahead of NFP Week

Article By: ,  Market Analyst
Friday 8:31 AM

Key Events

  • Tokyo CPI rises to 2.2% from 1.8% in November
  • USDJPY falls below 150, marking a 4.4% decline from November highs
  • Upcoming Volatility Risks:

- US ISM Manufacturing PMI (Monday)

- US JOLTS Job Openings (Tuesday)

- US ISM Services PMI and Fed Powell Speech (Wednesday)

- US Unemployment Claims (Thursday)

- US Non-Farm Payrolls (Friday)

Tracking Japan's economic developments, the rise in Tokyo CPI above the 2% benchmark raises expectations for yen-supportive policies from the BOJ. However, the market sentiment towards the Fed rate expectations is set to take the lead next week with leading US economic growth indicators, the US ISM Manufacturing and Services PMI, insights from Fed Powell on Wednesday, and Non-Farm Payrolls on Friday.

These data points will shape Fed rate expectations ahead of the Dec. 18th FOMC meeting and the BOJ decision on Dec. 19th, keeping traders on edge before the holiday season.

Technical Analysis: Quantifying Uncertainties

USDJPY Forecast: 3-Day Time Frame - Log Scale

Source: Tradingview

As the US Dollar pulled back from the 107-mark, USDJPY retreated slightly below 157, dipping back into its lower channel. The pair now faces key support zones at 148.80 and 146.80, aligning with the mid-channel boundary and the 0.618 Fibonacci retracement of the September-November uptrend.

The Relative Strength Index (RSI) remains below the neutral 50 level, continuing its downward trajectory after reversing from negative divergence and overbought conditions on the 3Day time frame, signaling room for further declines.

If USDJPY rebounds from the recent 149.50 low, the 154 level emerges as a potential resistance zone, aligning with the upper channel boundary. A break above this level could pave the way for further advances towards 157 and 160, increasing risks for the Yen and a BOJ intervention.

--- Written by Razan Hilal, CMT on X: @Rh_waves

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