USD to JPY forecast: USD/JPY drops sub 150 ahead of key us data

The markets are looking interesting ahead of the new month starting next week. The USD/JPY pair has fallen, testing liquidity below the key 150.00 level ahead of key US economic data reports, including jobs data due on Friday. In addition to the jobs report, several other macro reports are scheduled for next week, such as the ISM Manufacturing PMI on Monday and the ISM Services PMI on Wednesday. Sandwiched between these is the JOLTS Job Openings report, which has gained increased attention recently as the Federal Reserve shifts its focus from inflation to employment. These upcoming data releases will undoubtedly impact the JPY to USD forecast ahead of both the Fed and BoJ policy meetings later in December.

BoJ rate hike expectations rise, underpinning yen

Meanwhile, expectations are rising that the Bank of Japan may hike interest rates in December, contributing to the yen's strength across the board, not just against the US dollar. The EUR/JPY for example is looking quite weak after breaking the 160.00 level, as it probes the 158.00 area, with the euro falling out amid all political and economic troubles in Europe.

USD/JPY drops to sub 150 support

Source: TradingView.com

Ahead of the abovementioned macro events, the dollar has weakened, as reflected in its performance against the yen. The USD/JPY is now testing the key 150 level, marked by the shaded blue area on the chart that had previously acted as resistance. This zone could provide a tradable bounce, potentially pushing the pair back toward the 200-day moving average and the resistance area around 151.30-152.00. This is the next key level to watch on the upside if a bounce occurs. However, if the support at 150.00 fails decisively, i.e., we see daily close below the 149.40-150.00 range, then it could open the door for a drop to 147.20 or even lower in the coming days.

USD/JPY forecast: Looking ahead to the first week of December

The week’s economic calendar is filled with US macro pointers, including ISM manufacturing PMI on Monday and Services PMI on Wednesday and the official nonfarm payrolls report on Friday. But with the Fed being laser focused on employment, we think that makes this JOLTS data perhaps more important than the ISM PMIs. Any signs of weakness here will increase the odds of a December rate cut, which was priced in around 66% probability as of Friday 29th November.

The week’s main data highlight will of course be the November jobs report. After a surprisingly strong report last month and following Trump’s victory in the presidential election race, investors have sharply reduced their expectations about further US interest rate cuts in 2025. The upcoming December rate decision is now a flip coin, and whether the Fed will go ahead with a cut at its last meeting for 2024 will be influenced, among other key data highlights, by this jobs report.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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