USD/JPY at Risk of Sub-133.50 on Flash PMIs and Recession Jitters

It is a relatively busy morning for the USD/JPY. Inflation figures for March drew interest this morning. However, April’s flash private sector PMI numbers will also influence later this morning.

In March, the core annual inflation rate held steady at 3.1%, while the annual inflation rate softened from 3.3% to 3.2%. The latest figures will unlikely force the Bank of Japan to veer from its ultra-loose monetary policy position.

The private sector PMIs may have more influence following the disappointing overnight stats from the US. Economists forecast the manufacturing PMI to rise from 49.2 to 50.0 and the services PMI to increase from 55.0 to 55.1.

After the better-than-expected trade data on Thursday, better-than-expected PMIs should deliver Yen support.

USD/JPY Price Action

This morning, the USD/JPY was down 0.15% to 134.020. A mixed start to the day saw the USD/JPY rise to an early high of 134.293 before falling to a low of 134.004.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to move through the 134.368 pivot to target the First Major Resistance Level (R1) at 134.725 and the Thursday high of 134.871. A return to 134.5 would signal a bullish USD/JPY session. However, US stats and Fed chatter must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at 135.228. The Third Major Resistance Level (R3) sits at 136.088.

Failure to move through the pivot would leave the First Major Support Level (S1) at 133.865 in play. However, barring a risk-off-fueled sell-off, the USD/JPY pair should avoid sub-133.5. The Second Major Support Level (S2) at 133.508 should limit the downside. The Third Major Support Level (S3) sits at 132.648.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The USD/JPY sits above the 50-day EMA (133.771). The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A USD/JPY holding above S1 (133.865) and the 50-day EMA (133.771) would support a breakout from R1 (134.725) to target R2 (135.228). However, a fall through S1 (133.865) and the 50-day EMA (133.771) would bring S2 (133.508) into view. A fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a busier day on the US economic calendar. Flash private sector PMI numbers for April will be in focus.

After disappointing Philly Fed Manufacturing Index numbers from Thursday, weak PMIs would also sound the recession bells. While the headline figures will draw interest, investors should consider the sub-components, including new orders, employment, and prices.

However, FOMC member commentary will also influence.