This Week: Will USDJPY hit new 5-month high above 158?

• USDJPY hits 5-month high before easing away from 158 psychological level
   
• USDJPY forecasted to trade between 154.41 - 158.17 this week
   
• Yen traders will be eyeing Japan's data dump due Friday, Dec 27th
   
• Japanese authorities already last week flagged caution against excessive JPY weakness

So far this year, JPY has weakened by nearly 9.9% against the US dollar.

Last week, USDJPY surged to a 5-month high, amid these major developments for markets:

• Wednesday, Dec 18th: the Fed's hawkish rate cut
   
• Thursday, Dec 19th: the Bank of Japan's (BoJ) dovish hold, with BoJ Governor Kazuo Ueda suggesting that more time may be needed before Japan's next rate hike.
   
• Friday, Dec 20th: Japanese authorities (currency chief Atsushi Mimura and Finance Minister Katsunobu Kato) to threaten intervention to stop further rapid weakening in the Yen.

Quiet Dollar?

Over on the US dollar side of the USDJPY equation, the US government has averted yet another shutdown.

And with the US economic calendar already light around Christmas Day, more focus is set to be given to the JPY side of the story.

Events Watchlist:

• Wednesday, Dec 25th: Speech by Bank of Japan (BoJ) Governor Kazuo Ueda

After the BoJ’s dovish hold at its Dec 19th policy decision, markets lowered the odds for a January 2025 rate hike from 68% this time last week, now down to 46.6%.

Such slashed odds have added to USDJPY's upside momentum in reaching a 5-month high.

If Ueda makes an unexpected hawkish about turn this week, that might send USDJPY down towards 155.

• Friday, Dec 27th: Japan data dump and BoJ December summary of opinions

Yen traders will have a lot to digest (not a pun on any post-Christmas food coma) when Japan releases this set of top-tier economic data:

1. December Tokyo CPI: forecasted to rise to 2.9% year-on-year (December 2024 vs. December 2023; higher than November 2.6% year-on-year figure)
    
2. November jobless rate: forecasted to remain steady at 2.5%
    
3. November retail sales: forecasted to rise 1.5% year-on-year, slightly lower than November's 1.6% year-on-year rise.
    
4. November industrial production: forecasted to shrink by 3.2% year-on-year; an about turn from November's 1.4% year-on-year growth

​​Also on the same day (Fri, Dec 27), the BoJ’s latest policy meeting’s summary of opinions is set to be released as well.

(Note: the summary of opinions from the BoJ’s October meeting is also due to be released this week, but a few days prior, on Christmas Eve, Dec 24th, but is set to carry less weight).

If the incoming economic data, along with the December meeting’s summary of opinions, support a longer pause before the BoJ’s next rate hike, that could send USDJPY above 158.00 – a level not seen since July 2024.

According to Bloomberg's FX model, there's a 74.7% chance that USDJPY trades within the 154.41 - 158.17 range this week.

Here’s a comprehensive list of other key economic data and events due this week:

Monday, December 23

• MXN: Mexico November trade
• SGD: Singapore November CPI
• TWN index: Taiwan November industrial production, unemployment rate
• CAD: Bank of Canada meeting minutes
• US500 index: US December consumer confidence

Tuesday, December 24

• AUD: Reserve Bank of Australia meeting minutes
• JPY: Bank of Japan summary of opinions from October meeting

Wednesday, December 25

• Christmas Day
• JPY: Speech by Bank of Japan Governor Kazuo Ueda

Thursday, December 26

• SG20 index: Singapore November industrial production
• USDInd: US initially weekly jobless claims

Friday, December 27

• JPY: Japan December Tokyo CPI; November jobless rate, retail sales, industrial production
• JP225 index: Bank of Japan summary of opinions from December meeting
• CN50 index: China November industrial profits