USD/JPY Run at 141 Hinged on China PMIs, US Stats, and the Vote

It is a busy start to the day for the USD/JPY. Prelim industrial production and retail sales figures for April will set the tone. Following disappointing core machinery orders for March, weak industrial production figures for April, and a gloomy outlook, would test the theory of a tweak to the Bank of Japan’s ultra-loose monetary policy stance.

Economists forecast industrial production to increase by 1.5% following a 1.1% rise in March.

Other stats include consumer confidence and housing sector numbers from Japan that should have a limited impact on the USD/JPY. However, economic indicators from China will influence, with private sector PMI numbers for May out later this morning.

NBS Manufacturing and Non-Manufacturing PMI figures for May will give investors a better view of the macroeconomic environment midway through the second quarter.

Economists forecast the NBS Manufacturing PMI to rise from 49.2 to 49.4 and the Non-Manufacturing PMI to fall from 56.4 to 55.0. A deeper contraction in the manufacturing sector would spook investors and weigh on riskier assets.

USD/JPY Price Action

This morning, the USD/JPY was flat at 139.785. A mixed start to the day saw the USD/JPY rise to an early high of 139.802 before falling to a low of 139.742.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to move through the 140.094 pivot to target the First Major Resistance Level (R1) at 140.619 and the Tuesday high of 140.931. A return to 140.5 would signal a bullish USD/JPY session. However, economic indicators and debt ceiling news must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test resistance at 141 but fall short of the Second Major Resistance Level (R2) at 141.456. The Third Major Resistance Level (R3) sits at 142.818.

Failure to move through the pivot would leave the First Major Support Level (S1) at 139.257 in play. However, barring a risk-off fueled sell-off, the USD/JPY pair should avoid sub-138.5. The Second Major Support Level (S2) at 138.732 should limit the downside. The Third Major Support Level (S3) sits at 137.370.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The USD/JPY sits above the 50-day EMA (139.180). 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 USD/JPY hold above S1 (139.257) and 50-day EMA (139.180) would support a breakout from R1 (140.619) to target R2 (141.456). However, a fall through the S1 (139.257) and 50-day EMA (139.180) would bring S2 (138.732) into view. A USD/JPY fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a relatively busy day on the US economic calendar.

JOLTs job openings will be the main report as investors prepare for Friday’s US Jobs Report. While the headline figure will influence, investors should consider quit rates. A pickup in quit rates would signal employee confidence in US labor market conditions.

However, FOMC members will also need consideration. FOMC members Harker and Bowman are on the calendar to speak today.

While the numbers and Fed commentary will influence, investors should monitor US debt ceiling-related news. Lawmakers could vote on the deal later today.