USDJPY inched up by 0.25% to trade at 151.700 in the New York session on Monday, propelled by strong US Purchasing Managers Index (PMI) data. As of this writing, the pair tested a three-day high, and buyers will likely be looking to break out of a week-long sideways movement. The Japanese yen had been supported by a better-than-expected Tankan Non-Manufacturing Index and the Tankan Large Manufacturing Index figures released on Sunday.
The stalemate in USDJPY movement had been underpinned by reduced dollar demand, underpinned by tepid US macroeconomic data over the past week, amid intervention rhetoric from Japan’s Minister for Finance, Shun’ichi Suzuki. On the other hand, the dollar’s rise during that period was curtailed by growing confidence of interest rate cuts beginning June. This position was supported by Fed Chairman Jerome Powell’s statement on Friday that the US inflation trajectory fits within the Fed’s vision.
In addition, the PCE figures failed to spur demand for the greenback, instead doing just enough to provide support against the downside. However, the March manufacturing largely data beat expectations, supporting the dollar’s upside. The ISM Manufacturing PMI read 50.3, exceeding the forecast 50.3. In addition, the ISM Manufacturing Prices came in at 55.8, substantially higher than the forecast 53.3.
However, the dollar’s further gains were limited by a weaker S&P Manufacturing PMI, which declined from February’s 52.2 to 51.9, missing the forecast target of 52.5. Looking ahead, USDJPY will look to the 10-year Japanese Government bond auctions for more volatility as the trading day comes to an end.
Technical analysis
The momentum on USDJPY favours the upside, as shown by the RSI indicator. However, the buyers will need to keep the pair above 151.57 to maintain the upward momentum. They will likely meet resistance at 151.78, but a break above that could build momentum to test the second resistance at 151.89 in extension. Conversely, a move below 151.57 will favour control by the sellers, with support at 151.40. A continuation of control by the sellers at that point could see further losses to test 151.25.
