USD/JPY aims to recapture 145.00 as US Manufacturing PMI hogs limelight

• USD/JPY is marching towards its previous week’s high at 145.00 ahead of US factory activity data.
• Investors are turning cautious ahead of the quarterly result season.  
• A stealth intervention by the BoJ in the FX moves is widely anticipated as the Japanese Yen is consistently depreciating.

The USD/JPY pair is looking to recapture the previous week’s high of 145.00 in the early London session. The asset is broadly having strength despite the sheer correction in the US Dollar Index (DXY). The USD Index has surrendered the majority of gains added in the Asian session as investors are cautious about United States Manufacturing PMI data.

S&P500 futures have surrendered their gains and have turned negative, portraying a decline in the risk appetite of the market participants. Investors are turning cautious ahead of the quarterly result season.  Banking and technology stocks are likely to be under pressure due to tight credit conditions and higher interest rates by the Federal Reserve (Fed).

The US Dollar Index has corrected to near 103.00 ahead of the key PMI figures. According to the estimates, Manufacturing PMI is seen expanding to 47.2 vs. the former release of 46.9. Investors should note that factory activities have been contracting straight for the past seven months and are expected to continue their contracting spell due to higher interest rates from the Fed. Apart from that, New Orders Index is expected to jump to 44.0 vs. the former release of 42.6.

Later this week, Federal Open Market Committee (FOMC) minutes will remain in focus. The minutes will provide a detailed explanation of the steady interest rate policy. However, Fed chair Jerome Powell has conveyed that two small interest rate hikes are appropriate this year.

On the Japanese Yen front, a stealth intervention by the Bank of Japan (BoJ) in the FX moves is widely anticipated as the Japanese Yen is consistently depreciating. BoJ Deputy Governor Ryozo Himino stated last week that signs of cost-push inflation are easing and demand-driven inflation is taking some place. This could be the outcome of an expansionary interest rate policy and rising wages.