USD/JPY Bulls Reliant on US JOLTS Job Openings to Target 138

It is a quiet start to the day for the USD/JPY. There are no economic indicators from Japan for investors to consider this morning. The lack of stats left investors to consider the First Republic Bank (FRC) news, the overnight numbers from the US, and the upcoming Fed monetary policy decision.

The ISM Manufacturing PMI rose from 46.3 to 47.1 in April. The key takeaways from the ISM survey included sharp increases in the employment and prices sub-components. In April, the ISM Manufacturing Employment Index jumped from 46.9 to 50.2, with the Prices Index up from 49.2 to 53.2.

Despite the better-than-expected numbers, the markets continue to bet on a 25-basis point Fed interest rate hike. The US government is grappling with the debt ceiling and a banking crisis, which may have drawn the attention of the Fed.

However, the weaker macroeconomic environment supports the Bank of Japan’s policy outlook, leaving monetary policy divergence in favor of the dollar.

USD/JPY Price Action

This morning, the USD/JPY was up 0.01% to 137.487. A mixed start to the day saw the USD/JPY fall to an early low of 137.377 before rising to a high of 137.532.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to avoid the 137.046 pivot to target the First Major Resistance Level (R1) at 137.975. A move through the Monday high of 137.544 would signal a bullish USD/JPY session. However, market risk sentiment and US stats must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at 138.472. The Third Major Resistance Level (R3) sits at 139.898.

A fall through the pivot would bring the First Major Support Level (S1) at 136.549 into play. However, barring a dollar sell-off, the USD/JPY pair should avoid sub-136.5 and the Second Major Support Level (S2) at 135.620. The Third Major Support Level (S3) sits at 134.194.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The USD/JPY sits above the 50-day EMA (134.922). The 50-day EMA 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 holding above the Major Support Levels and the 50-day EMA (134.922) would support a breakout from R1 (137.975) to target R2 (138.472). However, a fall through S1 (136.549) would bring S2 (135.620) and the 50-day EMA (134.922) 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 busy day on the US economic calendar. The US JOLTs Job Openings and factory Orders will be in focus. We expect increased sensitivity to labor market stats ahead of the Fed interest rate decision.

Economists forecast job openings to fall from 9.913 million to 9.683 million. While the headline figure will influence, quit rates also need consideration. A sharp decline in the quit rate would signal deteriorating labor market conditions.

Away from the economic calendar, US corporate earnings will also influence market risk sentiment. Big names on the US earnings calendar include Pfizer Inc. (PFE), Starbucks Corp. (SBUX), and Ford Motor Co (F).