After the publication of the dismal United States (US) manufacturing and services PMI data, investors turned to a more dovish view on the setting of monetary policy by the Federal Reserve (Fed) with the expectation of interest rate hikes to be slowed down.
Investors saw the most significant decline in the services sector, recording contraction to 44.1 points lower than expected to rise to 49.8. Similarly, the manufacturing sector data which shrank to 51.3 points shows that growth in the manufacturing sector has also been low since July 2020.
Although much of the published data is gloomy, it is still too early to give the impression that the Fed will change their hawkish view due to this report as there is still a lot of key data for the central bank to scrutinize.
Additionally, investors will look to the upcoming Jackson Hole economic symposium on Friday and Saturday for the latest indication of US policy-making in Fed Chairman Jerome Powell's speech.
Showing the price movement on the chart of the USD/JPY pair, the price is flat above the 137.000 zone after the successful increase exhibited in the bullish pattern last week.
The Asian trading session connected to the European session yesterday still saw flat prices in the zone before the price drop took place in the New York session following the publication of the US PMI data which weakened the US dollar.
The drop in price has reached around 135,800 after crossing the support level of the Moving Average 50 (MA50) on the 1-hour time frame on the USD/JPY chart giving an early signal for the beginning of a bearish trend change for the price.
Continuing the trading of the Asian session today, the price is seen moving slowly below the price barrier of 137,000 with signs to continue the decline lower in the following sessions.
If the price continues to decline to a lower level, the price is expected to review the 135,000 level again to test the RBS (resistance become support) zone.
A lower drop for a more obvious bearish trend movement will push the price towards the next support zone at 132,000.
On the other hand, if the price manages to rise and pass the barrier at the 137,000 zone, the latest high level will be recorded for the price signal to resume the bullish trend movement in the previous weeks.
The next upside target has the potential to reach a high at 139.00, marking a recent 6-week high.
