Yen Rises Further as IMF Backs Gradual BoJ Tightening; Dollar Awaits NFP Impact
| Action Insight Daily Report 2-7-25 |
Yen Rises Further as IMF Backs Gradual BoJ Tightening; Dollar Awaits NFP Impact |
The forex market was relatively subdued during Asian session, with one clear exception: Japanese Yen continues to outperform. Fresh data from Japan showed a 2.7% yoy increase in household spending, not only marking the first rise in five months, but also the fastest pace since August 2022. Paired with this week’s solid wage growth figures, the numbers suggest real wage gains are driving consumption—a development that could reinforce BoJ's push toward gradual policy normalization. Additionally, IMF offered further support for Yen by endorsing a gradual rise in BoJ rates to a neutral range of 1-2% by the end of 2027. Although this view appears somewhat conservative compared to hawkish BoJ board member Naoki Tamura’s call for a 1% rate by the second half of fiscal 2025, the gap isn’t significant. If Japan’s inflation and wage growth hold up, it’s feasible that interest rates could reach the midpoint of 1.5% within a few quarters from Tamura's target. Attention now shifts to the US non-farm payroll report, with prospects of upside surprise. Dallas Fed President Lorie Logan raised an interesting argument that Fed may not ease policy further unless the labor market noticeably softens, even if inflation trends lower. A strong NFP reading would bolster expectations for an extended Fed pause. However, it may not be enough to spark an upside breakout in the Dollar from recent ranges, given ongoing uncertainties tied to US trade policies.... |
USD/JPY Daily Outlook Daily Pivots: (S1) 150.83; (P) 151.86; (R1) 152.48; More... USD/JPY is now pressing 38.2% retracement of 139.57 to 158.86 at 151.49 as fall from 158.86 extended. Strong bounce from current level will keep this decline as a correction, and retain near term bullishness. Firm break of 153.70 support turned resistance will turn bias back to the upside for stronger rebound. However, sustained break of 151.49 will raise the chance of bearish reversal, and target 61.8% retracement at 146.32 next. | |
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
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| 23:30 | JPY | Household Spending Y/Y Dec | 2.70% | 0.30% | -0.40% | | 05:00 | JPY | Leading Economic Index Dec P | 108.9 | 108.1 | 107.5 | | 07:00 | EUR | Germany Industrial Production M/M Dec | -2.40% | -0.70% | 1.50% | 1.30% | | 07:00 | EUR | Germany Trade Balance (EUR) Dec | 20.7B | 17.1B | 19.7B | | 07:45 | EUR | France Trade Balance (EUR) Dec | -5.3B | -7.1B | | 08:00 | CHF | Foreign Currency Reserves (CHF) Jan | 731B | | 13:30 | CAD | Net Change in Employment Jan | 26.5K | 90.9K | | 13:30 | CAD | Unemployment Rate Jan | 6.80% | 6.70% | | 13:30 | USD | Nonfarm Payrolls Jan | 169K | 256K | | 13:30 | USD | Unemployment Rate Jan | 4.10% | 4.10% | | 13:30 | USD | Average Hourly Earnings M/M Jan | 0.30% | 0.30% | | 15:00 | USD | Wholesale Inventories Dec F | -0.50% | -0.50% |
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