Tankan Surveys to Spotlight Business Confidence
On Wednesday, October 1, the BoJ’s Tankan Surveys for the third quarter will take center stage. Economists forecast the Tankan Large Manufacturers Index to increase from 13 in Q2 to 15 in Q3.
A higher reading could ease concerns about US tariffs impacting demand, supporting a more hawkish BoJ policy stance. On the other hand, a lower print may temper rate hike expectations.
The BoJ has discussed the need to assess the effect of US tariffs on the Japanese economy before considering a monetary policy adjustment.
Consumer Confidence and Household Spending Plans
On Thursday, October 2, economists expect Japan’s Consumer Confidence Index to rise to 35.2 in September, up from 34.9 in August. Improved sentiment could signal stronger spending and inflationary pressures. Conversely, a lower print may curb spending, supporting a less hawkish BoJ rate path.
Labor Market Data and Ueda’s Guidance
On Friday, October 3, unemployment data may also influence the BoJ’s policy stance and demand for the yen. Economists forecast unemployment to rise from 2.3% in July to 2.4% in August. Rising unemployment would indicate weaker wages, potentially cooling consumer spending and demand-driven inflation. On the other hand, steady unemployment may support a rate hike later in the month.
Beyond the data, Bank of Japan Governor Kazuo Ueda will wrap up a busy week. Forward guidance on the timing of an interest rate hike could be pivotal for the yen.
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USD/JPY Outlook: Economic Indicators and the BoJ
Bullish Yen Scenario: Strong Japanese data or hawkish BoJ commentary could push USD/JPY toward 145.
Bearish Yen Scenario: Softer data or dovish signals may send the pair toward the August high of 150.917.
US Data and Fed Signals to Drive the Dollar
The US economic calendar is equally heavy, with consumer confidence, labor market data, and the ISM Services PMI in focus.
Key releases include:
CB Consumer Confidence Index (September 30): Expected to drop from 97.4 in August to 96 in September.
JOLTs Job Openings (September 30): Forecast to fall from 7.181 million in July to 7.1 million in August.
ADP Employment Change (October 1): Expected to report a 30k rise in September after August’s 54k increase.
Initial Jobless Claims (October 2): Forecast to rise from 218k (week ending September 20) to 220k (week ending September 27).
Nonfarm Payrolls (October 3): Expected to increase by 39k in September after a 22k rise in August.
Unemployment Rate (October 3): Forecast to remain at 4.3% in September.
Average Hourly Earnings (October 3): Expected to rise 3.7% year-on-year in September, mirroring August’s increase.
ISM Services PMI (October 3): Forecast to remain at 52 in September.
Stronger-than-expected US labor market data could dampen Fed rate-cut expectations, boosting the dollar and USD/JPY. Softer readings would cement bets on an October Fed rate cut, weighing on the US dollar.
Beyond the data, Fed speeches will require consideration as the October interest rate decision looms. Multiple FOMC members are on the calendar to speak. Reaction to last week’s inflation data and this week’s labor market indicators could fuel USD/JPY volatility.
Short-term Forecast:
Bullish US Dollar Scenario: Strong US economic data or hawkish Fed cues may drive USD/JPY toward the August 1 high of 150.917.
Bearish US Dollar Scenario: Softer US data or dovish Fed rhetoric could drag USD/JPY toward 145.
USD/JPY Price Action
Daily Chart
On the daily chart, the USD/JPY trades above the 50-day and the 200-day Exponential Moving Averages (EMAs), signaling bullish momentum.
A breakout above the September 26 high of 149.957 could bring the August high of 150.917 into sight. A sustained move through 150.917 may enable the bulls to target the March high of 151.301.
On the downside, a drop below the 149.358 support level may pave the way toward the 200-day EMA. If breached, the pair could test the 50-day EMA, with 145 as the next key support level.
AloJapan.com