USD/JPY - Bullish breakout seen on USDJPY, what's next? - 07/03/2024 (GMT)

Fundamental Perspective:
USDJPY has extended its rally, buoyed by interest rate differentials and robust US economic data. The latest US jobs report revealed a surge in May job openings to 8.140 million, surpassing the forecast of 7.91 million. April's figures were revised downward to 7.919 million, marking a three-year low. Federal Reserve Chairman Powell acknowledged progress in disinflation during an ECB conference but refrained from specifying the timing for rate cuts. Investor attention is now shifting to the upcoming US General Election, which could overshadow any expectations of the Fed easing.

In contrast, Japan's services sector saw its first contraction since August 2022, as reflected in the au Jibun Bank Japan Services PMI dropping to 49.4 in June 2024 from May's 53.8. This downturn, coupled with stagnant new orders and slower growth in foreign sales, points to economic weakness. Despite employment expanding at its slowest pace in five months, Japanese service providers are grappling with reduced backlogs and rising input costs, contributing to a decline in business sentiment to an eight-month low.
Market focus remains on the Bank of Japan's upcoming policy meeting and potential adjustments to its monthly government bond purchases. Concerns about yen intervention persist as the currency approaches a historic low. However, a repeat of the past large-scale yen purchases by the Ministry of Finance with no tightening measures by the BoJ is unlikely to reverse the yen's decline sustainably.

Technical Perspective:
Technically, USDJPY has decisively broken above its ascending channel on the monthly timeframe, establishing 154.80 as a crucial resistance-turned-support zone. If USDJPY maintains its bullish momentum, further gains towards resistance at 165.00 and the 78.6% Fibonacci extension might occur, akin to the extent of the rally observed from January to November 2023. Conversely, if a throwback occurs, USDJPY could test the breakout zone near 154.80, potentially extending its decline towards the support at 141.00 upon breaching 154.80.