Beyond the US labor market, US services sector PMI numbers may also impact investor expectations of a Fed rate cut.

US ISM Services PMI Another Fed Consideration

The services sector accounts for over 70% of the US economy and contributes to headline inflation.

Economists expect the ISM Services PMI to drop from 53.8 in May to 52.5 in June. Furthermore, economists predict the ISM Services Prices Index to fall from 58.1 to 57.8.

More modest service sector activity and weaker input price pressures could fuel investor bets on a September Fed rate cut.

However, investors should consider the ISM Services PMI data alongside the US labor market data.

The Fed may require softer service sector activity and a pullback in service sector prices. Weaker labor market conditions would also be considerations in their decision to cut interest rates in 2024.

Late in the US session, the FOMC Meeting Minutes may have a limited impact on the USD/JPY. Recent US economic indicators could give investors a more current picture of the Fed rate path.

Short-term Forecast: Bearish

USD/JPY trends remain hinged on intervention threats, BoJ commentary, US labor market data, and services sector data. Hotter-than-expected US data could sink investor bets on a September Fed rate cut. However, an intervention to bolster the Yen would offset the immediate effects of the numbers from the US.

Investors should stay vigilant as the Japanese Services PMI release approaches. Monitor real-time data and expert commentary to adjust trading strategies accordingly. Stay informed with our latest updates and insights to navigate the USD/JPY dynamics effectively.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the July 2 high of 161.745 could signal a return to the 162 handle.

The Japanese government, Bank of Japan, US labor market data, and services PMIs require consideration.

Conversely, a drop below the 160 handle could give the bears a run at the 50-day EMA.

The 14-day RSI at 75.74 shows a USD/JPY in overbought territory. Selling pressure may increase at the July 3 high of 161.745.