USD/JPY is trading cautiously as investors digest softer data on U.S. industrial activity in preparation for Tuesday’s interest rate decision by the Bank of Japan (BoJ).
US industrial production rose 0.1% m/m in May, beating expectations of 0.3% and slowing sharply from the previous gain of 0.9%. The weaker reading slightly reduces support for the US dollar (USD) as it points to weaker momentum in the industrial sector.
These data directionally confirmed the NY Empire State Index for June, which gave a reading of 5.7, which is below both the consensus of 14 and the May value of 19.6.
Meanwhile, the Japanese yen (JPY) remains focused on the BoJ as markets widely expect the central bank to raise its short-term interest rate from 0.75% to 1.00%, which would be Japan’s highest rate in decades.
Short-term technical analysis:
On the 4-hour chart, the USD/JPY rate is 160.07. The pair is trading between key moving averages, holding above the 100-period uncomplicated moving average (SMA) at 159.78, but trading below the 20-period SMA at 160.29, leaving the short-term tone neutral, if slightly subdued on the upside. The Relative Strength Index (RSI) is around 45, indicating a loss of upside momentum while not signaling oversold conditions, suggesting consolidation rather than an immediate directional breakout.
On the other hand, initial support is seen horizontally around 160.03, followed by 159.99 and 159.89, with the 100-period SMA strengthening a deeper cushion near 159.78. Upside, immediate resistance appears at the horizontal barrier around 160.16, ahead of the 20-period SMA at 160.29; a sustained move above this cluster would be necessary to reopen the path towards a more constructive USD/JPY bullish bias.
(The technical analysis for this story was written with the lend a hand of an AI tool.)
