USD/JPY Bears Eye 142.50 on US Stats and Intervention Chatter

Highlights

• Monetary policy divergence remains in favor of the dollar ahead of inflation reports from Japan and the US this week.
• There were no economic indicators from Japan or China to shift investor sentiment this morning.
• Later today, US consumer confidence and core durable goods orders will move the dial.

It is a quiet start to the Tuesday session for the USD/JPY. There are no economic indicators from Japan or China for investors to consider this morning.

The lack of economic indicators will leave the USD/JPY in the hands of market risk sentiment early in the day.

However, inflation numbers from Japan on Friday could fuel bets on a Bank of Japan tweak to its ultra-loose monetary policy stance, pressuring the USD/JPY ahead of the US session. On Monday, government intervention chatter delivered Yen support, with investors needing to be mindful of a possible government move should the Yen weaken further.

USD/JPY Price Action

This morning, the USD/JPY was down 0.05% to 143.429. A mixed start to the day saw the USD/JPY rise to an early high of 143.571 before falling to a low of 143.283.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The USD/JPY sat above the 50-day EMA (142.160). 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 hold above the Major Support Levels and the 50-day EMA (142.160) would support a breakout from R1 (143.840) to target R2 (144.173). However, a fall through S1 (143.053) would bring S2 (142.599) and the 50-day EMA (142.160) into view. A slide through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The US Session

Looking forward to the US session, US core durable goods and CB Consumer Confidence numbers will draw interest. A fall in the CB Consumer Confidence Index to below 100 would likely overshadow upbeat core durable goods orders.

Other stats include US new home sales, building permits, and house price numbers. However, these are unlikely to influence market sentiment toward Fed monetary policy.

This morning, bets on a July Fed interest rate hike remained elevated despite manufacturing sector woes. According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 75.6% versus 71.9% on Friday.

Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 10.6%, down from 11.5% on Friday, easing bets on a further widening in monetary policy divergence in favor of the greenback.