USD/JPY is expected to trade in a range of ¥155.50 to ¥159.00 next week. An upside surprise in Tokyo’s inflation data could rekindle expectations for a BoJ rate hike.
USD/JPY is expected to move within a ¥155.50–159.00 range next week, even as expectations for additional rate hikes in Japan and the US in October recede, with stronger-than-expected Tokyo inflation data likely to stimulate hopes for a BoJ policy review. 外為どっとコム総研 sees resistance around ¥159 on the upside, while the downside is expected to remain firm in the latter half of the ¥155 range.
USD/JPY traded between ¥156.38 and ¥158.46 this week, remaining within the previous forecast range of ¥156.00–159.60. The main opinions released by the BoJ from its September Monetary Policy Meeting indicated that the Cabinet Office had pointed to the need to review the cumulative effects of rate hikes. The Tankan survey also came in slightly below market expectations, reducing expectations for consecutive rate hikes in October.
In the US, the focus was on the employment report. Nonfarm payrolls rose by 29,000 from the previous month, while the unemployment rate increased to 4.2%. The probability of an additional rate hike in October could shift again depending on comments from Fed officials and movements in interest rates. USD/JPY briefly declined immediately after the release before continued buying drove a recovery.
On the technical side, the key level on the upside is whether the pair can break above ¥158.50, near the 200-day moving average. On the downside, a break below the 25-day moving average at ¥156.65 would make a move toward downside targets more likely. Next week, attention is likely to focus on developments in the US employment report, comments from Governor Ueda (植田), and decisions by the FOMC and the BoJ.