Economists forecast the Index to increase from -14.4 to -11.0 in April. Better-than-expected numbers could raise expectations of the US economy to avoid a recession. Nevertheless, the numbers are unlikely to influence the Fed interest rate trajectory.

The manufacturing sector contributes less than 30% to the US economy.

However, US labor market data and service sector PMI numbers will influence investor bets on a September Fed interest rate trajectory. The US Jobs Report and ISM Services PMI are out on Friday (May 3).

Before the reports, the markets can recalibrate their expectations of H2 2024 Fed rate cuts on Wednesday (May 1). The FOMC interest rate decision and press conference will warrant investor attention.

After the better-than-expected US Personal Income and Expenditures Report, the markets remain divided about a September Fed rate cut. According to the CME FedWatch Tool, the probability of the Fed leaving interest rates at 5.50% stood at 41.8% today, up from 31.6% on April 19.

Short-term Forecast

Near-term trends for the USD/JPY hinge on the Bank of Japan and the Japanese government. Hawkish chatter from the BoJ and intervention threats from the Japanese government could pressure the USD/JPY. However, investors should consider US labor market data and the FOMC press conference.

USD/JPY Price Action

Daily Chart

The USD/JPY sat comfortably above the 50-day and 200-day EMAs, confirming the bullish price trends.

A USD/JPY break above the April 26 high of 158.437 would support a move to the 160 handle.

Bank of Japan commentary, Japanese government intervention threats, and the Dallas Fed Manufacturing Index need consideration.

Conversely, a USD/JPY drop below the 157.5 handle could support a fall toward the 50-day EMA and the 151.685 support level.

The 14-day RSI at 86.40 shows the USD/JPY in overbought territory. Selling pressure may intensify if the USD/JPY approaches the April 26 high of 158.437.