USD/JPY and 141 in the Hands of Debt Ceiling News and US Stats

It is a relatively quiet start to the day for the USD/JPY. Unemployment figures from Japan will draw interest this morning. Economists forecast the unemployment rate to fall from 2.8% to 2.7% in April.

Tighter labor market conditions would support a Bank of Japan tweak to the monetary policy outlook. However, economic uncertainty in China and softer Tokyo inflation numbers for May should allow the BoJ to maintain its ultra-loose monetary policy position near-term.

USD/JPY Price Action

This morning, the USD/JPY was down 0.01% to 140.408. A mixed start to the day saw the USD/JPY rise to an early high of 140.462 before falling to a low of 140.313.

USD/JPY Technical Indicators

Resistance & Support Levels

The USD/JPY needs to move through the 140.485 pivot to target the First Major Resistance Level (R1) at 140.859 and the Monday high of 140.918. A move through the morning high of 140.462 would signal a bullish USD/JPY session. However, US economic indicators and debt ceiling news must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at 141.292. The Third Major Resistance Level (R3) sits at 142.099.

Failure to move through the pivot would leave the First Major Support Level (S1) at 140.052 in play. However, barring a risk-off fueled sell-off, the USD/JPY pair should avoid sub-139.5. The Second Major Support Level (S2) at 139.678 should limit the downside. The Third Major Support Level (S3) sits at 138.871.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The USD/JPY sits above the 50-day EMA (138.977). The 50-day pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A USD/JPY hold above the Major Support Levels and 50-day EMA (138.977) would support a breakout from R1 (140.859) to target R2 (141.292). However, a fall through the S1 (140.052) would bring S2 (139.678) and the 50-day EMA (138.977) into view. A USD/JPY fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a relatively quiet day on the US economic calendar. US housing sector data and consumer confidence numbers for May will be in focus. We expect the CB Consumer Confidence Index to have more impact.

Elevated inflation, the Fed policy moves, and the US debt ceiling crisis will likely test consumer confidence. However, tight labor market conditions could limit the damage. Economists forecast the CB Consumer Confidence Index to fall from 101.3 to 99.0.

While the numbers will influence, investors should monitor Fed chatter and US debt ceiling-related news.