USD/JPY Bulls to Target 143 on Hawkish Fed Bets

It is a quiet Monday for the USD/JPY. There are no economic indicators from Japan or China to consider through the morning session.

The lack of stats will leave investors to consider the BoJ forward guidance and FOMC member chatter from Friday.

Committed to maintaining an ultra-loose policy position, economic indicators from Japan could force a shift in monetary policy forward guidance this week. Inflation and private sector PMI numbers will need consideration.

However, investors must wait until Friday for the stats. Fed Chair Powell and FOMC members may have inflicted more JPY losses by Friday figures.

USD/JPY Price Action

This morning, the USD/JPY was down 0.01% to 141.841. A mixed start to the day saw the USD/JPY fall to an early low of 141.711 before rising to a high of 141.971.

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 (140.237). 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 S1 (140.501) and the 50-day EMA (140.236) would support a breakout from R1 (142.563) to target R2 (143.268). However, a fall through S1 (140.501) and the 50-day EMA (140.237) would bring the 100-day EMA (139.620) and S2 (139.144) into view. A USD/JPY fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The USD/JPY needs to avoid the 141.206 pivot to target the First Major Resistance Level (R1) at 142.563. A breakout from the Friday high of 141.912 would signal a bullish USD/JPY session. However, the central bank 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 143.563. The Third Major Resistance Level (R3) sits at 145.330.

A fall through the pivot would bring the First Major Support Level (S1) at 140.501 into play. However, barring a surprise BoJ signal-fueled sell-off, the USD/JPY pair should avoid sub-139.5 and the Second Major Support Level (S2) at 139.144. The Third Major Support Level (S3) sits at 137.082.

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. The US markets are closed for Juneteenth Day. A lack of US economic indicators will leave Fed chatter to influence.

After better-than-expected Michigan Consumer Sentiment and Michigan Consumer Expectation numbers and hawkish Fed chatter from Friday, monetary policy divergence remains firmly in favor of the dollar.

FOMC member Christopher Waller and Thomas Barkin supported more rate hikes considering current inflation levels.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 74.4%, up from 52.8% one week earlier. Significantly, the chances of a September 25-basis point interest rate hike rose from 50.0% to 67.1% over the week, while bets on a 50-basis point interest rate hike fell from 15.7% to 11.2%.