USD/JPY Bulls Eye 142.50 on US Macroeconomic Environment

Highlights

• It is a busy morning for the USD/JPY, with industrial production and retail sales figures from Japan to draw interest.
• However, NBS private sector PMI numbers from China will have more impact on market risk sentiment and the USD/JPY.
• The near-term technical indicators turned bullish, signaling a return to 142.

On Friday, the USD/JPY rallied by 1.23% to wrap up the day at 141.147. Market reaction to the BoJ monetary policy decision and sentiment toward the US economy supported a dollar breakout.

Industrial production and retail sales figures will move the dial this morning. While industrial production numbers will influence, we expect the retail sales figures to have more impact.

While the numbers from Japan need consideration, NBS private sector PMI numbers from China will set the tone.

The US Session

It is a quieter US session, with Chicago PMI numbers for July in focus. However, barring a fall to sub-40, investors will likely brush aside the July numbers, with the ISM Manufacturing PMI out on Tuesday.

After softer Core PCE Price Index figures, investors will look for reasons for the Fed to push interest rates higher in September. Employment and prices sub-components of the PMI surveys will influence investor sentiment.

USD/JPY Price Action

Daily Chart

The Daily Chart showed the USD/JPY hovered below the lower level of the 141.2 – 141.9 resistance band. Friday’s bullish session sent the USD/JPY through the 50-day EMA (140.161). The USD/JPY remained above the 200-day EMA (136.792), sending bullish near and longer-term price signals.

Notably, the 50-day EMA moved away from the 200-day EMA, supporting further gains.

Looking at the 14-Daily RSI, the 52.01 reading signals a bullish outlook, supporting a move through the 141.2 – 141.9 resistance band to target sub-142. However, a USD/JPY fall through the 50-day EMA (140.161) would give the bears a run at the 139.5 – 138.6 support band.

4-Hourly Chart

Looking at the 4-Hourly Chart, the USD/JPY faces strong resistance at 141. However, the USD/JPY sits above the 200-day (140.643) and 50-day (140.393) EMAs, sending bullish near and longer-term price signals.

Significantly, the 50-day EMA narrowed on the 200-day EMA, signaling a move through the 141.2 – 141.9 resistance band. However, a USD/JPY fall through the EMAs would bring the 139.5 – 138.8 support band into play.

The 14-4H RSI reading of 56.87 sends bullish signals, with selling pressure outweighing buying pressure. Notably, the RSI aligns with the EMAs and supports a run at the 141.2 – 141.9 resistance band and 142.