USD/JPY Outlook: Jibun Bank PMIs and Bank of Japan Decisions
Jibun Bank PMIs and Economic Impact
On Tuesday, attention will turn to the preliminary private sector PMI figures. The Jibun Bank Services PMI is expected to marginally decrease from 54.1 to 54.0 in April, while the Jibun Bank Manufacturing PMI is predicted to drop from 48.2 to 48.0.
Given the Bank of Japan’s focus on the services sector’s role in driving inflation and influencing interest rate decisions, these figures could notably affect the USD/JPY exchange rate.
An increase in service sector activity might lead to heightened expectations of a BoJ interest rate adjustment. Investors should closely watch PMI sub-components like employment, prices, and new orders, as these could trigger discussions on rate hikes.
The Bank of Japan’s monetary policy decision will be announced on Friday, April 26, with expectations leaning towards maintaining the interest rate at zero percent. However, Governor Kazuo Ueda might discuss the PMIs in his press briefing.
US Economic Indicators and Federal Reserve Actions
In the US, preliminary private sector PMIs due on Tuesday are also set to draw investor interest, especially with dwindling expectations for multiple Federal Reserve rate cuts in 2024.
The Services PMI, which represents over 70% of the US economy and is a significant inflation driver, is projected to slightly decline from 53.1 to 53.0 in April.
An unexpected increase could alter the outlook for a potential Fed rate cut in September. With no Fed speeches scheduled due to the FOMC blackout period starting Saturday, April 20, the focus will be purely on PMI data.
Short-term Forecast for USD/JPY
The near-term trajectory of the USD/JPY will largely depend on the outcome of the Services PMIs from both the US and Japan. Enhanced service sector activity in Japan, coupled with rising employment and wages, might prompt speculation about a sooner-than-expected shift in BoJ policy.
Conversely, a stronger US Services PMI could push back expectations of Fed rate reductions, potentially leading to selling pressure on USD/JPY if Japan’s data outperforms.
USD/JPY Price Action
Daily Chart Currently, USD/JPY is maintaining a strong position above both the 50-day and 200-day EMAs, underscoring the bullish trend. A rise above the April 22 high of 154.850 could pave the way toward the 155 level.
However, if the pair falls below the 154 mark, it might challenge the support at 151.685. The 14-day RSI stands at 76.21, indicating that the currency pair is in overbought territory, which could heighten selling pressure around the 154.850 high.
