USD/JPY meanders around 130.00, waiting for the Fed’s May meeting

• The USD/JPY began May on the right foot, up some 0.21%.
• The market mood is risk-of, courtesy of the FOMC meeting and China’s Covid-19 spread.
• USD/JPY Price Forecast: Range-bound, contained to the upside, after last week’s language intervention by the Japanese Finance Minister.

The USD/JPY remained comfortable above the 130.00 figure on Monday, as US Treasury yields heightened the day ahead of the Federal Reserve monetary policy meeting, led by the 10-year benchmark note closing into the 3% threshold. At the time of writing, the USD/JPY is trading at 130.11, up some 0.20%.

Market sentiment weighed by the FOMC meeting and China’s Covid-19 spread

A risk-off environment struck Monday’s trading session. The sentiment is dismal ahead of the Federal Reserve meeting, as China struggles to control the Covid-19 spread, with Shanghai reporting 58 new cases as restrictions threaten to be imposed once again, while Beijing keeps pushing for more testing. On the Ukraine-Russian front, things remain unmoved, with talks going nowhere, while hostilities escalate, as newswires reported that Russia is “laying the groundwork” for a takeover of Moldova, according to the Times.

Meanwhile, earlier in the North American session, the ISM Manufacturing PMI for April grew at a slower pace to 55.4 and missed expectations of 57.6, and trailed March’s 57.1 readings. Regarding the report, the ISM Manufacturing Business Survey Committee chair Timothy Fiore said new coronavirus outbreaks overseas were “creating a near-term headwind for the US manufacturing community,” noting that some manufacturers worried “about their Asian partners’ ability to deliver reliably in the summer months.”

The positive of the reading is that the index of Prices Paid fell from 87.1 to 84.6, a signal that could probably mean that inflation could be peaking.

Also, read: US: ISM Manufacturing PMI falls to 55.4 in April versus 57.6 expected

Meanwhile, US bond yields remain elevated ahead of the Federal Reserve May’s monetary policy meeting. The US 10-year Treasury note sits at 2.99%, hovering around the 3% threshold, underpinning the greenback, with the US Dollar Index gaining some 0.28%, up at 103.502.

On the Japanese front, the Consumer Confidence nudged up in April to 33, from a 31.7 forecast and higher than the 32.8 in March. “Consumer sentiment turned positive as COVID-19 cases fell further and as the lifting of curbs paved the way for a reopening of the economy,” according to sources cited by Reuters.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart shows that the pair remains confined to the 130.00 area as market players await the Federal Reserve. Both MACD lines MACD and signal are trendless, which means the major is range-bound, awaiting a fresh catalyst.

Meanwhile, the USD/JPY 1-hour chart depicts the USD/JPY seesawing around the daily pivot point around 130.05, while MACD on this time frame depicts the pair as range-bound.

Upwards, the USD/JPY first resistance would be 130.50. Break above would expose the R1 daily pivot around 130.80, followed by the 131.00 mark. On the other hand, the USD/JPY first support would be the daily pivot around 130.05. A breach of the latter would expose the 100-hour simple moving average (SMA) at 129.39, followed by the S1 daily pivot near 129.10-14.