Title: USD/JPY Eyes 155 Level as Japanese Yen Strengthens Amid U.S. Data, Weak Japanese GDP
Author: David Becker
Original Publication: Trading News
Link: https://www.tradingnews.com/news/usd-jpy-price-forecast-yen-climbs-toward-155-us-japans-weak-gdp
The U.S. dollar moved toward 155 yen amid global economic developments, as traders weighed weaker-than-expected U.S. data alongside disappointing economic output from Japan. On May 16, 2024, the USD/JPY pair saw increased volatility driven by macroeconomic indicators from both economies. With markets closely watching the Federal Reserve’s next moves and the Bank of Japan’s (BoJ) cautious stance, the pair has become a center of attention for currency traders and central bank watchers.
This article examines the recent performance of the USD/JPY currency pair, the differences in monetary policy between the U.S. and Japan, and what might be expected as both central banks prepare for future decisions.
Key Takeaways
– The Japanese yen showed strength, pushing USD/JPY closer to the key 155 resistance level.
– U.S. weekly jobless claims rose more than expected, signaling a potential cooling in the labor market.
– Japanese GDP contracted more than economists forecasted in the first quarter of 2024, adding pressure on the BoJ.
– The divergence in monetary policy between the Fed and the BoJ remains a dominant factor in influencing USD/JPY price action.
Japanese Yen Strengthens Against Dollar
Earlier this week, the Japanese yen appreciated against the U.S. dollar, with the value of the currency pair falling to trade near 155. This movement reflects a tug-of-war between fundamental news out of both countries. The dollar had been strengthening for much of 2024, fueled by interest rate hikes in the U.S., but weakness in recent job market data caused some moderation.
For the Japanese side, the yen strengthened modestly even in the face of gross domestic product (GDP) data that showed Japan’s economy contracted 2.0% on an annualized basis in the Q1 2024. Economists surveyed had predicted a smaller contraction, closer to 1.2%. This surprisingly weak performance contributed to growing doubts over how and when the Bank of Japan would normalize its monetary policy after years of extremely low rates and massive easing.
U.S. Economic Indicators Shift Dollar Momentum
U.S. economic data released on May 16 showed an unexpected uptick in weekly jobless claims, which rose to 222,000, above the forecast of 220,000. Though the difference appears slight, it adds to the trend of a cooling labor market seen in recent months. Continuing claims also rose to 1.794 million, suggesting that workers are finding it slightly harder to get new jobs.
Key Economic Metrics from the U.S.:
– Weekly jobless claims: 222,000 vs. forecast 220,000
– Continuing claims: 1.794 million vs. prior 1.78 million
– Philadelphia Fed Manufacturing Index for May: 4.5 vs. 8.0 forecast
– The index decline signals slower growth in manufacturing activity
These developments brought renewed expectations that the Federal Reserve might cut interest rates sooner than hinted in previous meetings. Markets began to price in at least two rate cuts by the end of 2024, down from earlier expectations of three or even four cuts, reflecting continued inflation pressures and the lagging impact of previous rate hikes.
Divergence in Central Bank Policy
The Federal Reserve and the Bank of Japan remain far apart in terms of interest rate policy, creating a primary driver for USD/JPY fluctuations.
Federal Reserve Policy Landscape:
– The Fed has held interest rates steady in recent meetings after a series of hikes in 2022 and 2023 to combat inflation.
– Inflation remains above the Fed’s target, although it has moderated from its 2022
Explore this further here: USD/JPY trading.