When analyzing the potential impact of the ISM Manufacturing PMI on USD/JPY trends, it is important to consider a multitude of factors that can influence the currency pair’s movement. Economists are predicting an increase in the ISM Manufacturing PMI from 46.8 in July to 47.8 in August, with better-than-expected numbers potentially supporting expectations of a soft landing for the US economy. However, investors need to delve deeper into the subcomponents of the PMI, particularly focusing on job creation trends amidst increasing scrutiny of the US labor market.
Impact of Positive Numbers
Positive numbers from the ISM Manufacturing PMI report may lead to a reduction in investor bets on a 50-basis point September Fed rate cut. This could result in a potential move in the USD/JPY pair towards 147.500. The Head of Investment Strategy and Chief Economist at AMP, Shane Oliver, noted that positive inflation numbers could keep the Fed on track for a -0.25% rate cut in September, assuming no significant weakening in job data.
Apart from the ISM Manufacturing PMI, investors should keep a close eye on the US services sector PMI, wage growth, and household spending figures from Japan. Positive data from Japan could increase bets on a Bank of Japan rate hike in Q4 2024 and lead to higher demand for the Yen. Conversely, weaker service sector activity and labor market conditions in the US may raise expectations of a 50-basis point rate cut by the Fed, potentially causing a decline in the USD/JPY pair towards 145.
In order to navigate the potential volatility in the USD/JPY pair, investors need to remain vigilant and continually monitor real-time data, central bank insights, and expert commentary. Adapting trading strategies based on the evolving economic landscape is crucial for managing risk and maximizing returns. Staying informed with the latest news and analysis can provide valuable insights into the factors driving USD/JPY trends.
From a technical perspective, the USD/JPY pair has remained below the 50-day and 200-day EMAs, indicating a bearish price trend. A potential move towards 147 could present an opportunity for bullish momentum to target the 147.500 level. Conversely, a breach of the 145.891 support level may lead to a further decline towards 144.500, with a break below this level signaling a move towards the 143.495 support level. The 14-day RSI at 45.41 suggests a potential downside for the USD/JPY pair, with a break below the 143.495 level indicating an oversold condition.