The US labor market and services sector PMI numbers are key factors that could influence investor expectations of a Fed rate cut, according to FX Empire. The services sector is a major contributor to the US economy, accounting for over 70% of it and impacting headline inflation.
Economists are anticipating a drop in the ISM Services PMI from 53.8 in May to 52.5 in June, along with a decrease in the ISM Services Prices Index from 58.1 to 57.8. These projections suggest a potential slowdown in service sector activity and weaker input price pressures, which could lead to bets on a Fed rate cut in September.
It is important for investors to consider both the ISM Services PMI data and the US labor market data when assessing the likelihood of a Fed rate cut. The Fed may take into account softer service sector activity, lower service sector prices, and weaker labor market conditions when making a decision on interest rates in 2024.
The FOMC Meeting Minutes later in the US session may not have a significant impact on the USD/JPY, as recent US economic indicators offer a more up-to-date insight into the Fed’s rate path. USD/JPY trends are influenced by intervention threats, BoJ commentary, US labor market data, and services sector data. While positive US data could dampen expectations of a Fed rate cut in September, intervention measures to strengthen the Yen could counteract the effects of the US numbers.
Investors should closely monitor the upcoming Japanese Services PMI release, real-time data, and expert commentary to adjust their trading strategies accordingly. Staying informed with the latest updates and insights can help navigate the dynamics of the USD/JPY effectively.
On the daily chart, the USD/JPY remains above the 50-day and 200-day EMAs, indicating bullish price trends. A break above the July 2 high of 161.745 could signal a return to the 162 handle, while a drop below the 160 handle might give bears an opportunity to test the 50-day EMA. The 14-day RSI at 75.74 suggests that the USD/JPY is in overbought territory, with selling pressure potentially increasing at the July 3 high of 161.745.