USD/JPY and 136.5 in the Hands of FOMC Member Speeches

It is a quiet start to the day for the USD/JPY on Monday. There are no economic indicators from Japan or China to influence.

The lack of economic indicators will leave market risk sentiment and central bank chatter to provide direction.

Over the weekend, a lack of progress on US debt ceiling talks leaves investors to wait for a resumption of talks on Tuesday. US President Joe Biden provided the markets with optimism over the weekend, reportedly saying there was an interest from both sides to come to an agreement.

USD/JPY Price Action

This morning, the USD/JPY was up 0.02% to 135.774. A bullish start to the day saw the USD/JPY rise from an early low of 135.625 to a high of 135.826.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to avoid the 135.300 pivot to target the First Major Resistance Level (R1) at 136.199. A move through the Friday high of 135.755 would signal a bullish USD/JPY session. However, the market risk sentiment must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at 136.654. The Third Major Resistance Level (R3) sits at 138.008.

A fall through the pivot would bring the First Major Support Level (S1) at 134.845 into play. However, barring a dollar sell-off, the USD/JPY pair should avoid sub-134 and the Second Major Support Level (S2) at 133.946. The Third Major Support Level (S3) sits at 132.592.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The USD/JPY sits above the 50-day EMA (134.918). The 50-day pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A USD/JPY hold above the 50-day EMA (134.918) would support a breakout from R1 (136.199) to target R2 (136.654). However, a fall through the 50-day EMA (134.918) and S1 (134.845) would bring the 100-day EMA (134.721) into view. A USD/JPY fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a relatively busy day on the US economic calendar. NY Empire State Manufacturing Index numbers for May will be in focus. Economists forecast a fall from 10.8 to -2.5, which would be bearish.

FOMC member commentary will also draw interest, with members Kashkari, Bostic, and Barkin speaking today. Hawkish chatter would give the USD/JPY a boost as investors look for clues on what is next from the Fed.

According to the CME FedWatch Tool, there was a 14.4% chance of a 25-basis point interest rate hike in June, down from 15.5% on Friday.

Beyond the economic calendar, the banking sector and the US debt ceiling will also need monitoring.