Economists expect the index to rise from -14.4 to -11.0 in April. A better-than-expected number could raise hopes that the U.S. economy will avoid recession. Still, this number is unlikely to affect the Fed's interest rate trajectory.
Manufacturing contributes less than 30% to the U.S. economy.
However, U.S. labor market data and services sector PMI numbers will influence investors' expectations about the Fed's interest rate trajectory in September. US employment statistics and ISM services PMI will be released on Friday (May 3).
Ahead of the report, the market could readjust its expectations for a Fed rate cut in the second half of 2024 on Wednesday (May 1). The FOMC's interest rate decisions and press conference will likely attract investors' attention.
Market opinion remains divided on whether the Fed will cut interest rates in September after a better-than-expected U.S. personal income and spending report. The probability that the Fed will keep interest rates unchanged at 5.50% is now 41.8%, up from 31.6% on April 19, according to the CME FedWatch tool.
short term forecast
The short-term movement of USD/JPY will depend on the Bank of Japan and the Japanese government. Hawkish behavior from the Bank of Japan and threats of intervention from the Japanese government could put pressure on the USD/JPY. However, investors should consider US labor market data and the FOMC press conference.
USD/JPY price action
daily chart
USD/JPY is comfortably above the 50-day and 200-day EMA, confirming the bullish price trend.
A move to the 160 handle will be supported if USD/JPY breaks above the April 26 high of 158.437.
The Bank of Japan's comments, the threat of Japanese government intervention, and the Dallas Fed Manufacturing Index need to be considered.
Conversely, a decline in USD/JPY below the 157.5 handle could support a decline to the 50-day EMA and 151.685 support level.
The 14-day RSI is 86.40, indicating that USD/JPY is in overbought territory. Selling pressure may increase as USD/JPY approaches the April 26 high of 158.437.
