Mixed PMI Data Spark Discussions About Monetary Policy

Andreas Thalassinos
Andreas Thalassinos

04.6.2024

The USDJPY currency pair remains on an upward trajectory despite the formation of the recent corrective wave. The mixed PMI data on Monday sparked rumors of a potential interest cut in September as monetary policy poses obstacles to expansion.

 

Overview

The USDJPY currency pair remains on an upward trajectory despite the formation of the recent corrective wave. The mixed PMI data on Monday sparked rumors of a potential interest cut in September as monetary policy poses obstacles to expansion. The release of the Non-Farm Employment Change and other high-impact data may shed light on the USDJPY path. Traders will closely monitor the currency pair due to the release of significant economic data this week that could impact the currency valuations.

High Impact Economic Events

Tuesday 02:00 pm (GMT+0): JOLTS Job Openings (USD)

Wednesday 01:30 am (GMT+0): GDP q/q( AUD)

Wednesday 12:15 pm (GMT+0): ADP Non-Farm Employment Change (USD)

Wednesday 01:45 pm (GMT+0): BOC Rate Statement (CAD)

Wednesday 01:45 pm (GMT+0): Overnight Rate (CAD)

Wednesday 01:45 pm (GMT+0): Final Services PMI (USD)

Wednesday 02:00 pm (GMT+0): ISM Services PMI (USD)

Wednesday 02:30 pm (GMT+0): BOC Press Conference (CAD)

Thursday 12:15 pm (GMT+0): Main Refinancing Rate (EUR)

Thursday 12:15 pm (GMT+0): Monetary Policy Statement (EUR)

Thursday 12:30 pm (GMT+0): Unemployment Claims (USD)

Friday 12:30 pm (GMT+0): Employment Change (CAD

Friday 02:00 pm (GMT+0): Unemployment Rate (CAD)

Friday 12:30 pm (GMT+0): Average Hourly Earnings m/m (USD)

Friday 12:30 pm (GMT+0): Non-Farm Employment Change (USD)

Friday 12:30 pm (GMT+0): Unemployment Rate (USD)

Fundamentals

The S&P Global Final Purchasing Managers' Index (PMI) released on Monday indicated a slight expansion in May as opposed to a slight contraction in April. Even though the overall new business was marginal, firms observed increasing demand in Europe, accompanied by a rise in new orders from Asia, Canada, and Mexico.

On the other hand, the ISM Manufacturing PMI reported a contraction in the manufacturing sector in May for the second consecutive month, registering 48.7 percentage points compared to 49.2 in April. Respondents associated the decreased data in the manufacturing sector with the tightening monetary policy, sparking rumors of potential interest rate cuts in September.

Technical Analysis

The USDJPY has been trending upward since December 28, when the currency pair rebounded from the 140.249 level, representing the 2023 all-time low. The formation of the Long-Legged Doji candlestick sparked increased interest by the bulls, who pulled the exchange rate above the 50-period Exponential Moving Average (EMA). Subsequently, on January 11, the price exceeded the peak at 145.979, signaling another indication of a bull market. While the USDJPY is currently in a corrective wave, potential buy opportunities may emerge near the Exponential Moving Average. Both the 50-period EMA and the Momentum oscillator support the bullish bias of the USDJPY. Specifically, prices are above the EMA, and the Momentum oscillator register values are above the 100 baseline.

Potential Upside Targets

If the bulls manage to maintain control of the USDJPY market, traders may consider the following three potential upside targets:

158.745: The initial upside target stands at 158.745, aligning with the 161.8 percent Fibonacci Extension drawn from the peak of 156.779 down to the trough of 153.597.

160.218: The second upside target is 160.218, corresponding to the peak on April 29.

161.927: An additional potential price objective could be identified at 161.927, representing the 261.8 percent Fibonacci Extension of the most recent swing.

Potential Downside Targets

If the bears manage to take control of the market, traders may find potential opportunities in the following three downside targets:

155.180: The initial price target is seen at 155.180, corresponding to the support (S3) estimated utilizing the weekly Pivot Point methodology.

153.597: The second price objective stands at 153.597, aligning with the trough of the most recent swing marked on May 16.

151.857: The third potential downside target is estimated at 151.857, representing the trough marked on May 3.

Conclusion

The USDJPY remains above the 50-period Exponential Moving Average, indicating an uptrend that poses potential support should the bears push the exchange rate lower. It is essential for traders to remain up-to-date on the latest geopolitical and economic developments, trade wisely, and closely monitor market trends to potentially optimize investment returns and mitigate probable risks and losses.

 

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.