USD/JPY Outlook: US Factory Orders and Fed Signals in Focus

During the early session, USD/JPY tested the 156.91 level, where a positive MACD crossover confirmed a buying entry, leading to a 30-pip gain. Geopolitical tensions in the Middle East have provided additional support for the dollar, while the yen has softened. However, the pair is approaching the 157.50 level, a zone previously marked by Bank of Japan currency interventions.

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In the second half of the day, market participants will focus on U.S. factory orders data. An increase in these orders would indicate rising demand and economic strength, likely strengthening the dollar further. On the other hand, a decline could signal a slowdown in production, presenting downside risks to the current bullish momentum.

Alongside the economic data, a speech by Federal Open Market Committee member John Williams is expected to impact market sentiment. Investors will analyze his remarks for signals regarding interest rate paths and inflation control measures. His assessment of the current economic outlook often serves as a precursor to future policy shifts.

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The first bullish scenario involves a buy entry at 157.35 with a target of 158.29, provided the MACD is above the zero line and rising. A secondary buying opportunity may develop if the 156.99 level is tested twice while the MACD is in the oversold area, suggesting a potential upward reversal toward 157.35.

Alternatively, a sell signal would be triggered by a break below the 156.99 support level, targeting a decline to 155.95. This move requires the MACD to be trending below the zero mark. Traders may also consider shorting the pair if it fails to clear 157.35 after two tests while the MACD is in the overbought region, targeting a move back toward 156.99.

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