In Japan, manufacturing PMI increased slightly from 48.9 in December to 48.9 in January.
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Sell the USD/JPY pair and set a take-profit at 127.56 (YTD low).Add a stop-loss at 133.Timeline: 1-3 days.
Set a buy-stop at 131 and a take-profit at 132.Add a stop-loss at 129.
The USD/JPY was flat on Tuesday and Wednesday as investors showed no interest on the flash manufacturing and services PMI numbers. It was trading at 130.05, where it has been this week. This price was a few pips above this year’s low of 127.16.
USD to JPY is still range-bound
There have been no material economic data from the United States and Japan so far this week. The most important one came on Tuesday when S&P Global published the latest flash manufacturing and services PMI numbers.
In Japan, manufacturing PMI increased slightly from 48.9 in December to 48.9 in January. Services PMI, on the other hand, rose to 52.4 during the month. Like in other countries, Japanese companies are dealing with high inflation. And some of them like Fast Retailing have started hiking wages to help staff deal with these challenges.
Elsewhere, in the United States, manufacturing activity remained in the contraction area as corporate profitability waned. The PMI rose to 46.8 while the services figure came in at 46.6. In a statement, 3M, a leading American manufacturer, said that it would shed workers by 2,500.
These numbers had no meaningful impact on the USD/JPY pair because the market has clues about what the Fed and the BoJ will do. The BoJ left rates and yield curve unchanged but analysts expect a tweak in the coming meetings. In the US, they expect that the Fed will hike by either 0.50% or 0.25% in its meeting this week.
The important data that will likely have an impact on the pair will come out on Thursday and Friday. The statistics agency will release the first estimate of Q4 GDP data on Thursday. It will then release the PCE, which is Fed’s most important inflation figure on Friday.
The USD/JPY price has managed to retest the upper side of the descending channel at 131. The current price is also notable since it coincided with the lowest point on August 2 last year. At the same time, the downtrend is being supported by the 50-day volume-weighted moving average while the Awesome Oscillator has remained below the neutral point since November 9.
Therefore, the outlook of the USD to JPY price is still bearish with the next reference point being at 127. The alternative scenario is where bulls come in higher volume and move above the upper side of the channel. If this happens, they could push the pair to the 50-VWMA at 134.