USD/JPY Eyes 136 on Household Spending and China Trade Data

It is a busy start to the day for the USD/JPY. Japan’s household spending figures will draw interest this morning. A rebound in household spending should deliver early Yen support.

However, economic data from China will also move the dial. Trade data for April will be in focus. While a narrowing in the dollar trade deficit would be bearish for the USD/JPY, we expect the import and export numbers to have more impact.

The USD/JPY will likely be more sensitive to the numbers following the weaker April private sector PMI numbers.

USD/JPY Price Action

This morning, the USD/JPY was down 0.02% to 135.055. A mixed start to the day saw the USD/JPY fall to an early low of 135.028 before rising to a high of 135.111.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to avoid the 135.009 pivot to target the First Major Resistance Level (R1) at 135.375. A move through the Monday high of 135.299 would signal a bullish USD/JPY session. However, the market risk sentiment and the 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 135.666. The Third Major Resistance Level (R3) sits at 136.323.

A fall through the pivot would bring the First Major Support Level (S1) at 134.718 into play. However, barring a dollar sell-off, the USD/JPY pair should avoid the Second Major Support Level (S2) at 134.352. The Third Major Support Level (S3) sits at 133.695.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The USD/JPY sits above the 50-day EMA (134.997). The 50-day EMA 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 the 50-day EMA (135.997) would support a breakout from R1 (135.375) to target R2 (135.666). However, a fall through the 50-day EMA (135.997) would bring S1 (134.718) and the 100-day EMA (134.637) 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 quiet day on the US economic calendar. There are no US economic indicators for investors to consider. A lack of stats will leave Fed chatter and market risk sentiment to influence ahead of the US CPI Report tomorrow.

Beyond the economic calendar, the banking sector, the US debt ceiling, and corporate earnings also need consideration.