FOMC Members in Focus Ahead of Key US Economic Data

While Japanese GDP data weighed on demand for the yen, US economic indicators and Fed commentary on monetary policy will influence expectations of a June Fed rate cut. Later on Monday, FOMC voting member Michelle Bowman is scheduled to speak following last week’s US jobs and CPI reports. Support for a June rate cut on cooling inflation would weaken demand for the US dollar, sending USD/JPY lower.

Last week’s inflation data overshadowed a hotter-than-expected US jobs report, raising bets on a June Fed rate cut. According to the CME FedWatch Tool, the probability of a June cut rose from 64.6% on February 12 to 68.6% on February 13, after the data release. However, Friday’s US Personal Income and Outlays Report, Services PMI numbers, and GDP data are likely to be key for US dollar demand.

Market expectations of a more dovish Fed policy stance and a hawkish BoJ rate path would reaffirm the negative short- to medium-term outlook.

Technical Outlook: Key Levels to Watch

For USD/JPY price trends, traders should closely track technical indicators, key economic indicators, government policy announcements, and central bank chatter.

On the daily chart, USD/JPY trades below its 50-day Exponential Moving Average (EMA), but remains above the 200-day EMA. The EMA positions signal a bearish near-term but bullish longer-term bias. Nevertheless, favorable yen fundamentals align with the short-term technicals, indicating a bearish medium-term outlook.

A sustained break below the 200-day EMA would signal a bearish trend reversal, bringing the 150 support level into play. If breached, 145 would be the next key support level.

Importantly, a sustained fall through the EMAs would reinforce the negative medium- to longer-term price outlook.