The sensitivity to economic numbers in the market could have a significant impact on the USD/JPY pair. For example, the unexpected increase in the Michigan Inflation Expectations Index led to gains in the USD/JPY following the market reaction on Friday. This shows that investors are closely monitoring economic indicators to make decisions on the currency pair.
Another factor that investors need to consider is the speeches by FOMC members. When members such as Loretta Mester and Philip Jefferson talk about inflation and monetary policy, it could influence the direction of the USD/JPY. Comments made by these members could potentially move the market and cause fluctuations in the currency pair.
The near-term trends for the USD/JPY are likely to be influenced by the US inflation numbers scheduled for release on Tuesday and Wednesday. If the numbers come in higher than expected, it could fuel speculation about a Fed rate hike and shift the monetary policy divergence towards the US dollar. However, threats of intervention could limit the upside for the USD/JPY, creating a balancing act for investors.
From a technical analysis perspective, the USD/JPY has been sitting comfortably above the 50-day and 200-day EMAs, indicating bullish signals. A breakout above the 156 handle could pave the way for a move towards the 158 level, with a potential target of the April 29 high of 160.209. On the flip side, a drop below 155 could bring the 50-day EMA into play, signaling a potential move towards the 151.685 support level. The 14-day RSI at 57.90 suggests a potential move towards the 160 handle before entering overbought territory.
In addition to economic indicators and technical analysis, investors should also keep an eye on external factors such as Bank of Japan commentary, US consumer inflation expectations, and speeches by Fed speakers. These factors could add another layer of complexity to the analysis of the USD/JPY pair and influence its future movements in the market.
The USD/JPY pair is subject to various influences, ranging from economic indicators to technical analysis and external factors. Investors need to carefully consider all these elements to make informed decisions and navigate the volatile currency markets effectively.