Market sensitivity to economic data, particularly the Michigan Inflation Expectation numbers released last Friday, has the potential to significantly impact the USD/JPY exchange rate. An unexpected increase in the Michigan Inflation Expectations Index led to gains for the USD/JPY pair. Looking ahead, investors should pay close attention to speeches by FOMC members, such as Loretta Mester and Philip Jefferson, as their comments on inflation and monetary policy could influence market sentiment.
The near-term outlook for the USD/JPY pair is likely to be influenced by key US economic data releases scheduled for Tuesday and Wednesday. Higher-than-expected inflation numbers could fuel speculation about a potential Federal Reserve rate hike, ultimately benefiting the US dollar. However, any intervention threats could limit the upside potential for the USD/JPY pair.
From a technical standpoint, the USD/JPY pair is currently trading well above both the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish bias. A breakout above the key psychological level of 156 could open the door for a test of the 158 level, with further upside potential towards the April 29 high of 160.209. On the flip side, a drop below the 155 level could bring the 50-day EMA into focus, potentially leading to a decline towards the 151.685 support level.
In addition to economic data releases, traders should also keep an eye on external factors that could impact the USD/JPY pair. This includes commentary from the Bank of Japan, US consumer inflation expectations, and speeches by Federal Reserve officials. The 14-day Relative Strength Index (RSI) currently stands at 57.90, suggesting that the USD/JPY pair may have room to advance towards the 160 handle before reaching overbought territory.
The USD/JPY pair is likely to be influenced by a combination of economic data releases, central bank commentary, and technical factors in the near term. Traders should remain vigilant and adapt their trading strategies accordingly based on the evolving market conditions.