As a leading indicator of inflation, unit labor costs could further influence investors' expectations for the Fed's September interest rate cut. In an environment of increasing demand, companies pass on labor costs to consumers. The Fed may respond to rising labor costs with a more hawkish interest rate trajectory.
However, non-agricultural productivity numbers will also influence the Fed's interest rate path. A lower-than-expected number could signal a deterioration in the macroeconomic environment and a weaker consumption outlook.
Other statistics include weekly unemployment claims, factory orders and trade data. Unless US factory orders unexpectedly fall and unemployment claims spike, this number will have a limited impact on USD/JPY.
short term forecast
The short-term trend of USD/JPY will depend on consumer confidence indicators from Japan and US employment statistics. However, if consumer confidence in Japan as a whole improves markedly, the divergence in monetary policy could shift toward the yen. The Fed has thrown cold water on further interest rate hikes. In contrast, the Bank of Japan may respond to an upward trend in household spending.
USD/JPY price action
daily chart
USD/JPY rose above the 50-day and 200-day EMA, confirming the bullish price signal.
If USD/JPY returns to the 158 handle, it will support a move towards the April 29 high of 160.209.
Bank of Japan minutes, Japanese consumer confidence statistics, and US labor market data need to be considered.
Alternatively, if USD/JPY breaks below the 154 handle, the bears could try to test the 50-day EMA. A move through the 50-day EMA may trigger the support level at 151.685.
The 14-day RSI is 56.42, suggesting that USD/JPY will return to the 158 handle before entering overbought territory.