Producer Prices to Spotlight Inflation
On Thursday, September 11, Japanese producer prices will provide insights into demand. Economists forecast producer prices to rise 2.7% year-on-year in August, up from 2.6% in July.
A sharper increase could raise bets on an October BoJ rate hike, boosting demand for the yen. On the other hand, softer producer prices could delay a BoJ policy move until December or potentially the first quarter of 2026.
Why do producer prices matter for traders?
Economists consider producer prices a key leading indicator of inflation. Producers typically adjust prices subject to demand. Producers may lower prices due to weakened demand and increased competition, passing on cost savings to consumers. However, producers could raise prices if demand improves, passing higher costs to consumers.
Other data include the Eco-Watchers Survey Outlook, Machine Tool Orders, Reuters Tankan Index, and finalized industrial production numbers. However, these will likely play second fiddle to the GDP and producer price data.
Bank of Japan Rate Path Hinged on Incoming Data
This week, the Japanese government announced a record minimum hourly wage hike of 6.3% to ¥1,121. Rising wages may boost consumer spending, fueling demand-driven inflation, a key factor for the BoJ.
Trade developments also lifted sentiment toward a BoJ rate hike. On Friday, September 5, President Trump reduced existing tariffs on Japanese autos from 27.5% to 15%, supporting Japan’s trade terms.
In July, a 27% (year-on-year) slump in Japanese auto shipments to the US raised recession risk. Demand slumped despite carmakers slashing prices to offset the effect of tariffs. The tariff cut could boost demand, ease price pressures, and curb recession risk.
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USD/JPY Outlook: Economic Indicators and the BoJ
Bullish Yen Scenario: Stronger Japanese data or hawkish BoJ signals could push USD/JPY toward 145.
Bearish Yen Scenario: Softer Japanese data or dovish BoJ rhetoric may send the pair toward 150.
US Nonfarm Payrolls and CPI Report to Drive US Dollar Trends
In the US, it’s another crucial week for the US dollar as markets digest Friday’s Jobs Report. US inflation data could provide traders with more insights into the timeline for fourth-quarter Fed rate cuts.
Key events include:
Nonfarm Payrolls Annual Revision (September 9).
Producer Prices (September 10): Expected to rise 3.6% year-on-year in August after increasing 3.3% in July.
Initial Jobless Claims (September 11): Forecast to rise from 237k (week ending August 30) to 240k (week ending September 6).
US Annual Inflation Rate (September 11): Forecast to rise from 2.7% in July to 2.9% in August.
Michigan Consumer Sentiment (September 12): Expected to increase to 59.2 in September, up from 58.2 in August.
Softer-than-expected producer and consumer prices, and a sharper rise in jobless claims, could fuel bets on multiple Fed rate cuts. A more dovish Fed policy stance would pressure the US dollar. On the other hand, hotter-than-expected inflation data and lower claims could temper expectations of policy easing in Q4. A less dovish Fed rate path may boost demand for the US dollar.
Beyond the data, traders should closely monitor Fed forward guidance. Reactions to the Jobs Report and this week’s inflation data will influence US dollar trends.
Short-term Forecast:
USD/JPY’s near-term outlook will hinge on key economic data and central bank commentary.
Bullish US Dollar Scenario: Strong US data or hawkish Fed signals may send USD/JPY toward 150.
Bearish US Dollar Scenario: Weaker US inflation or dovish Fed rhetoric could push USD/JPY toward 145.
USD/JPY Price Action
Daily Chart
On the daily chart, the USD/JPY trades above the 50-day Exponential Moving Average (EMA) but below the 200-day EMA. The EMAs signal a bearish near-term but bullish longer-term bias.
A breakout above the 200-day EMA may pave the way toward the 149.358 resistance level. A sustained move through the 149.458 resistance level could bring the August 1 high of 150.917 into play.
On the downside, a break below the 50-day EMA could enable the bears to target the August 14 low of 146.214. If breached, 145 would be the next key support level.
AloJapan.com