USD/JPY outlook could change dramatically with key events in focus

Fawad Razaqzada
By :  ,  Market Analyst


The USD/JPY has started to trend slightly lower, turning negative on the week, ahead of big macro events starting in the latter half of this week. First up, we have US GDP data today followed by the first policy meeting under the leadership of the new Bank of Japan Governor on Friday. There will be plenty of other key data releases throughout the remainder of this and much of next week from the US, with the FOMC meeting scheduled for Wednesday. So, the USD/JPY outlook could change dramatically and perhaps multiple times over the next several days.


Top 5 events to watch for USD/JPY outlook over next 1.5 weeks


Here’s the top three events of week that could impact the USD/JPY outlook in the remainder of this and much of next week:


Advance US GDP

Thursday, 27 April

13:30 BST


We have seen some rather weak economic pointers of late, although the nonfarm payrolls report still surprised to the upside. But what about GDP? If we see weakness in the economy then investors may start betting that the Fed will not only stop hiking interest rates past May, but soon it may even start loosening monetary policy again. Analysts expect US first quarter GDP to come in at +2.0% annual pace vs. +2.6% in Q4.


In addition to the GDP, we have lots of other key data releases from the US in the remainder of this and much of next week.


The potential for US economic activity to drop more sharply than expected means the Fed may respond later in the year by being more aggressive in cutting interest rates, just like how they were (very late) when tightening policy in response to soaring inflation. If this is what the market starts to price in, in response to this week’s macro events, then the dollar index could break to a new low for the year and starting heading towards 100.00.



BOJ Monetary Policy decision

Friday, 28 April

04:00 BST



This will be the first policy meeting under the leadership of the new Bank of Japan Governor, Kazuo Ueda. Given that Ueda has already mentioned that he will continue with the BOJ's current policy stance, the yen has weakened across the board in recent times, before starting to show renewed strength this week, especially against commodity dollars (AUD, NZD and CAD). But be mindful of any potential surprises with regards to the BoJ’s yield curve control (YCC) settings. Any policy change would likely trigger a sharp rally in the yen and a sell-off in yen crosses like USD/JPY and AUD/JPY.


One reason why the BOJ might avoid altering its policy is concerns about Japan returning to deflation. This means it may postpone any plans to change the YCC policy until next year.


US Core PCE Price Index

Friday, 28 April

13:30 BST


As we found out recently, US CPI cooled to 5% annual rate, which was more than expected. There’s been more signs of inflation heading lower. Yet the hawks at the FOMC camp want to see more evidence before pausing rate hikes. The Core PCE Price Index is the Fed’s favourite measure of inflation, and the last inflation gauge before the Fed’s meeting next week. So, it could tilt policy decision if it deviates significantly from expectations. A weaker print could send the dollar plunging.



FOMC Policy Meeting

Wednesday, 3 May

19:00 BST



“Whilst concerns of weaker US economic data and that the exodus of deposits from mid-tier banks is bubbling away in the background, the odds continue to favour another 25bp Fed hike on Wednesday. This will take rates to 5.25%, which Fed Fund Futures currently imply will be the terminal rate. Yet comments from Fed members remained predominantly hawkish into the blackout period, so traders will be looking for clues to decipher whether it is a hawkish hike (+25bp with more to follow), or a dovish hike (+25bp with the potential to pause). We can forget about any sort of pivot until we see unemployment spike and jobs growth falter and / or we do actually see a financial meltdown.” – by my colleague Matt Simpson.


US non-farm payrolls

Friday, 5 May

13:30 BST


“JOTS job openings, ADP employment, initial claims data and the employment indices from the ISM manufacturing and services PMIs all arrive ahead of Friday’s Nonfarm payroll report. And that leaves plenty of opportunity for some moves ahead of NFP as traders try to guess the magic numbers. With markets sensitive to weak US economic data, I suspect USD bears could pounce at a whiff of weak employment data (especially if it appears to be a trend). At the time of writing, NFP job growth is expected to fall to a post-pandemic low of 181k and unemployment rise to 3.6%. Whilst this reflects a slight deterioration of the employment sector, I doubt it is enough to warrant a dovish undertone by the Fed when they presumably hike by 25bp on Wednesday.” – by my colleague Matt Simpson.


USD/JPY Economic Calendar this week

Here’s a list of upcoming data for the remainder of this week, which could impact the USD/JPY outlook:



Time (BST)











Thu Apr 27



Advance GDP q/q






Unemployment Claims






Advance GDP Price Index q/q






Pending Home Sales m/m









Fri Apr 28



Tokyo Core CPI y/y






Unemployment Rate






Prelim Industrial Production m/m






Retail Sales y/y






Monetary Policy Statement






BOJ Policy Rate






Core PCE Price Index m/m






Employment Cost Index q/q






Personal Income m/m






Personal Spending m/m





USD/JPY consolidates inside bear flag


Ahead of the above macro events, the USD/JPY remains trapped bang in the middle of its recent range. Hardly surprising. Many traders wouldn’t want to commit in either direction, given the big risk events coming up in the next week or two (see above for more).


The higher lows since the January nadir are certainly not bearish indicators. Yet, the inability of the USD/JPY to challenge its 200-day average means the longer-term outlook remains bearish. Indeed, a bear flag pattern is starting to form on the daily chart now:


usd/jpy outlook



I would start feeling more bearish towards this pair if support around 133.40 breaks on a daily closing basis now. A move below 132.00 would create an interim lower low, and thus a bearish signal.


But while it holds above that 133.40 support level on a daily closing basis, the bulls will remain hopeful for a recovery.


If the USD/JPY were to find support and move above 135.00 resistance, then this could trigger follow-up technical buying towards 136.00. In this case, a retest of the 200-day average around 137.00 cannot be rule out either.


All told, the USD/JPY at its current state is not looking very bullish.


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