Softer-than-expected figures could increase investor bets on a September Fed rate cut. Weaker labor market conditions could impact consumer confidence, wages, and disposable income. The net effect could be a pullback in consumer spending, dampening demand-driven inflation.

However, investors should also consider the ISM Services PMI. Economists forecast the ISM Services PMI to increase from 49.4 to 50.5. Hotter-than-expected numbers could affect the Fed rate path. The services sector contributes over 70% to the US economy and influences inflation trends.

Beyond the headline figure, investors should consider the subcomponents, including prices and employment.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the Services PMIs, US labor market data, and household spending numbers from Japan. Tighter US labor market conditions and a pickup in US services sector activity could tilt monetary policy divergence toward the US dollar.

USD/JPY Price Action

Daily Chart

The USD/JPY remained above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY breakout from the 156 handle would support a move toward the 158 handle. Furthermore, a USD/JPY move to the 158 handle could give the bulls a run at the April 29 high of 160.209.

Service sector PMIs and US labor market data need investor consideration.

Conversely, a USD/JPY break below the 50-day EMA would give the bears a run at the 151.685 support level.

The 14-day RSI at 45.55 indicates a USD/JPY fall to the 151.685 support level before entering oversold territory.