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Got the U.S. ISM manufacturing PMI due soon! Will this trigger a bounce or break for USD/JPY?

Before we head on to the chart setup, let’s have a quick rundown of the latest updates in the past trading sessions:

Upcoming Potential Catalysts on the Economic Calendar:

  • Speeches by FOMC members Williams and Brainard at 2:00 pm GMT
  • Canadian manufacturing PMI at 2:30 pm GMT
  • ISM manufacturing PMI at 3:00 pm GMT
  • ECB head Lagarde’s speech at 4:10 pm GMT

What to Watch: USD/JPY

USD/JPY 1-hour Forex Chart
USD/JPY 1-hour Forex Chart

Higher highs and lower lows? Why, that seems to be a bearish divergence right there!

USD/JPY is testing the top of its rising channel on the 1-hour chart and seems to be ready for a countertrend bounce. If that takes place, the pair could retreat to nearby support levels at the middle of the channel or the very bottom at 105.25.

Technical indicators are looking mixed, with the moving averages making a bullish crossover and Stochastic setting its sights lower.

The upcoming ISM manufacturing PMI release could determine whether a bounce or break is due, and analysts are expecting the figure to stay unchanged at 58.7.

Weaker than expected results, particularly when it comes to the jobs component, could be ominous for the February NFP due later in the week. Strong data, on the other hand, could spur a break past the channel top and a steeper climb for the Greenback.