• The dollar fell due to renewed bets for a 50 bps September Fed rate cut.

• Several Bank of Japan policymakers drummed up support for more rate hikes.

• Investors will focus on the FOMC and BoJ policy meetings.

The USD/JPY weekly forecast indicates a potential collapse if the Fed cuts by 50-bps and the Bank of Japan delivers a hawkish meeting.

Ups and downs of USD/JPY

USD/JPY has fallen and closed on a bearish candle in the past week. This came as the dollar collapsed while the yen strengthened. The dollar fell due to renewed bets for a 50 bps rate cut towards the end of the week. Initially, inflation reports had pointed to a smaller cut.

On the other hand, the yen rallied as several Bank of Japan policymakers drummed up support for more rate hikes.

Next week’s key events for USD/JPY

Next week, investors will focus on the FOMC policy meeting and retail sales data from the US. At the same time, the Bank of Japan will hold its policy meeting on Friday. Investors have waited for the September Fed meeting for a long time. The Fed will likely pivot at this meeting, implementing its first rate cut.

However, investors are unsure whether this will be 25 or 50 bps. A small rate cut could boost the dollar as it would precede a gradual pace for easing. On the other hand, a large rate cut would sink the greenback.

Meanwhile, the Bank of Japan might maintain rates for now. However, economists are pricing another rate hike before the year ends.

USD/JPY weekly technical forecast: Bullish divergence near 140.07

On the technical side, the USD/JPY price has made a new low in the downtrend after breaking below the 144.00 support level. Bears have remained in charge since the price broke below the 22/SMA, and the RSI dipped below 50. Since then, the price has declined steeply and paused near the 140.07 support level.

However, bears have weakened with time, and the price started consolidating near the 22-SMA. At the same time, the RSI has made a bullish divergence, indicating fading bearish momentum. Therefore, the tides might soon change. If bears fail to breach the 140.07 support, the price might reverse to challenge the 22-SMA and the 144.00 level.

A break above the SMA would indicate a shift in sentiment. On the other hand, if the SMA holds firm, the downtrend might continue.

https://www.forexcrunch.com/blog/2024/09/14/usd-jpy-weekly-forecast-fed-cut-hawkish-boj-to-trigger-bears/