Across the Pacific, durable goods orders will be in focus later on Monday. Economists forecast durable goods orders to rise 0.3% month-on-month in September after August’s 2.9% surge.
A higher reading could signal resilient business demand. Sustained demand may boost hiring and wages, potentially fueling inflation. A higher inflation outlook could support a less dovish Fed rate path. A less dovish Fed policy stance could lift demand for the US dollar and send USD/JPY toward 155.
On the other hand, an unexpected drop in orders could lead to job cuts and slower wage growth. Job cuts and softer wage growth may curb consumer spending and dampen inflationary pressures. A softer inflation outlook would support a more dovish Fed rate path, potentially pushing USD/JPY toward 150.
While US data will influence demand for the US dollar, traders should also closely monitor developments on Capitol Hill. A prolonged US government shutdown could reinforce expectations of a more dovish Fed policy outlook. However, a Senate vote passing a stopgap funding bill could expedite the release of delayed labor market reports, potentially fueling uncertainty about a Fed rate cut in December.
USD/JPY Scenarios: Trade Headlines and Central Bank Divergence
Bearish USD/JPY Scenario: hawkish BoJ rhetoric, weak US data, or US-Japan tariff talks could push USD/JPY toward 150.
Bullish USD/JPY Scenario: dovish BoJ commentary, strong US data, or US-Japan tariff uncertainties could send USD/JPY toward 155.
