USD/JPY and a Return to 140 in the Hands of China Trade Data

It is a quiet Wednesday morning for the USD/JPY. There are no economic indicators from Japan for investors to consider. The lack of economic indicators will leave trade data from China to move the dial.

While exports will influence, a slump in imports would signal weak demand and likely pressure the USD/JPY. Private sector PMI numbers for May sent mixed signals, and economic indicators have raised red flags. Disappointing numbers today would increase market sensitivity to the inflation numbers on Friday.

However, the economic indicators from China are unlikely to push the Bank of Japan off its ultra-loose monetary policy perch.

USD/JPY Price Action

This morning, the USD/JPY was down 0.07% to 139.534. A range-bound start to the day saw the USD/JPY rise to an early high of 139.665 before falling to a low of 139.534.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to move through the 139.571 pivot to target the First Major Resistance Level (R1) at 140.047. A move through the Tuesday high of 139.993 would signal a bullish USD/JPY session. However, market risk sentiment must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at 140.469 and resistance at 140.5. The Third Major Resistance Level (R3) sits at 141.367.

Failure to move through the pivot would leave the First Major Support Level (S1) at 139.149 in play. However, barring a risk-off fueled sell-off, the USD/JPY pair should avoid sub-138.50. The Second Major Support Level (S2) at 138.673 should limit the downside. The Third Major Support Level (S3) sits at 137.775.

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The USD/JPY sat above the 50-day EMA (139.449). The 50-day pulled 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 50-day EMA (139.449) would support a breakout from R1 (140.047) to target R2 (140.469) and 140.5. However, a fall through the 50-day EMA (139.449) would bring S1 (139.149) and the 100-day EMA (138.702) into view. A USD/JPY fall through the 50-day EMA would send a bearish signal.

The US Session

It is another quiet US session. US trade data will need consideration early in the session. However, barring a sharp widening in the trade deficit, the numbers should have a limited impact on the USD/JPY.

While the economic calendar is light, no FOMC members are speaking today. The Fed entered the blackout period that ends on June 15.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike slipped from 24.1% to 19.4% on Tuesday versus 66.6% one week earlier.