Retail Sales Key for an Economic Rebound
The unemployment and inflation numbers will coincide with Japanese retail sales figures. October’s figures could face increased scrutiny, given concerns over the weaker Japanese yen driving import prices higher. Typically, rising import prices reduce households’ purchasing power.
Economists forecast retail sales to rise 0.8% year-on-year in October, up from 0.5% in September.
Why do traders need to consider retail sales trends?
Private consumption accounts for around 55% of Japan’s GDP and influences demand-driven inflation. Stronger consumption could boost the economy and fuel demand-driven inflationary pressures, supporting a more hawkish BoJ rate path.
For context, private consumption rose 0.1% quarter-on-quarter in Q3, down from 0.4% in Q2, contributing to the 0.4% quarterly economic contraction.
Economists Keep December BoJ Rate Hike Hopes Alive
Despite Japan’s third-quarter contraction, economists have raised bets on a December BoJ rate hike, exposing USD/JPY to the risk of a sharp reversal.
According to November’s Reuters poll, conducted between November 11 and 18:
43 of 81 economists (53%) expected the BoJ to raise interest rates to 0.75% at the December policy meeting. In October, 31% of economists predicted a December rate hike.
100% of economists forecast a 0.75% borrowing rate by the end of March, up from 96% of respondents in the October poll.
Meanwhile, the median prediction for the policy rate at the end of 2026 remained unchanged at 1.00%.
Follow our real-time updates to stay ahead of USD/JPY market developments.
USD/JPY Outlook: Economic Indicators and the BoJ
Bullish Yen Scenario: Strong Japanese data, intervention warnings, or hawkish BoJ rhetoric. These scenarios could push USD/JPY toward 150.
Bearish Yen Scenario: Weak data or dovish BoJ comments. These scenarios may drive USD/JPY toward 160.
Although Japanese data, BoJ commentary, and intervention risks will influence demand for the yen, traders should closely track US data and Fed speeches.
US Inflation, the Labor Market, and the Fed in Focus
As Japan’s policy outlook remains uncertain, traders could face heightened USD/JPY price volatility as US government offices resume the scheduled release of key economic reports. Inflation and jobs data will be key, given concerns about elevated prices and a cooling labor market.
Key data releases for the week ahead include:
ADP Employment Change Weekly (November 25).
Producer prices (November 25): Economists forecast producer prices to rise 0.3% MoM in September after falling 0.1% in August.
Retail sales (November 25): Expected to rise 0.4% MoM in September, following August’s 0.6% increase.
CB Consumer Confidence Index (November 25): Projected to drop from 94.6 in October to 93.3 in November.
Initial Jobless Claims (November 26): Expected to rise from 220k week ending November 15 to 224k week ending November 22.
Core PCE Price Index (November 26): Forecast to increase 2.9% YoY in September, matching August’s rise.
Softer-than-expected US inflation, a cooling labor market, and weaker retail sales could raise bets on a December Fed rate cut. A more dovish Fed rate path could push USD/JPY toward 150.
However, tariff-driven inflation could overshadow weaker labor market data and lower bets on a Fed rate cut. A more hawkish Fed policy stance would lift demand for the US dollar and send USD/JPY higher.
Beyond the key data, traders should monitor FOMC members’ comments on the data and the timing of a rate cut.
Short-term Forecast:
Bullish US Dollar Scenario: Hotter US inflation and hawkish Fed rhetoric may send USD/JPY toward 160.
Bearish US Dollar Scenario: Softer US inflation and dovish Fed chatter could push USD/JPY toward 150.
USD/JPY Price Action
Daily Chart
On the daily chart, USD/JPY remained well above the 50- and 200-day Exponential Moving Averages (EMAs), reaffirming bullish momentum.
A break above the 156.884 resistance level could pave the way toward the November 20 high of 157.893. A sustained move through 157.893 may open the door to retesting 160.
On the downside, a break below 155 could expose the 153 support level. If breached, the 50-day EMA would be the next key support level.
AloJapan.com