USD/JPY is expected to remain locked in the ¥159 area next week. The G20 Finance Ministers and Central Bank Governors’ Meeting and the US jobs report will be the focus, with attention on the market’s reaction to moves toward ¥160 following the intervention.
USD/JPY traded with little sense of direction this week, centered around the ¥159 area. Even as the US July PCE deflator continued to rise, USD/JPY failed to reach ¥160. Warnings about risks from the Bank of Japan’s deputy governor and the rise in Tokyo’s 23-ward CPI supported yen weakness, but the pair still failed to fully break above the level seen after the intervention.
Next week’s forecast range for USD/JPY is ¥157.50–¥160.80. The main focus will be the G20 Finance Ministers and Central Bank Governors’ Meeting and the US jobs report. At the meeting from 31 August to 1 September, market expectations will center on the response following coordinated intervention by Japan and the United States, as well as the possibility of new measures to address yen weakness. Meanwhile, if stronger-than-expected US jobs data heighten expectations of a Federal Reserve rate hike, USD/JPY is likely to move more readily toward ¥160.
Technically, the key upside question on a daily basis is whether the pair can break above the 25-day moving average at ¥159.43 and the 100-day moving average at ¥160.00. On the downside, the 200-day moving average at ¥158.42 is an important support level, and a break below it could trigger a correction into the ¥157 area. The RSI remains in neutral territory, and the pair is likely to take divergent paths next week around this inflection point.
Key events and indicators next week include the G20, comments from Bank of Japan officials, and the US jobs report. Particular attention will be paid to whether the strength of US employment data reignites the persistence of dollar strength and yen weakness. Leading indicators such as JOLTS, ADP and the ISM business surveys will also be watched as potential sources of risk.