The USD/JPY is trading above 142.00, as investors await the release of the US PMI and the minutes of the Federal Open Market Committee meeting.

Highlights:

• The USD/JPY is trading above 142.00, as investors await the release of the US PMI and the minutes of the Federal Open Market Committee meeting.
• The USD/JPY has been in positive territory for the last two days.
• The final manufacturing PMI of the US for December came in lower than expected, falling to 47.9 from 48.2.
• According to Ueda, the BOJ’s ability to achieve its inflation target seems to have started to improve.
• The minutes of the Fed’s meeting and the final US ISM manufacturing PMI will be released later on Wednesday.

The USD/JPY cross is trading above the 142.00 level in the early Asian session on Wednesday. The rebound in the U.S Dollar is providing some support to the pair. Investors are awaiting the U.S. ISM Manufacturing PMI for December, due later on Wednesday, which is expected to show an increase to 47.1 from the previous reading of 46.7. The USD/JPY is currently trading around the 142.10 level, up 0.10% on the day.

The final U.S. manufacturing PMI for December came in at 47.9 from 48.2, lower than expected. Output fell at the fastest pace in six months as the recent decline in new orders intensified. The Federal Reserve’s (Fed) dovish stance after its December meeting dragged the USD lower across the board. However, the strength of the U.S. economy may limit the dollar’s downside. The International Monetary Fund (IMF) forecast that the U.S. economy will grow by 1.5% in 2024, compared to 1.2% for the Eurozone and 4.2% for China.

Market participants will be closely watching the likelihood that the Bank of Japan (BOJ) will consider a change in its monetary policy. BOJ Governor Kazuo Ueda said on December 25 that the likelihood of the central bank achieving the 2% inflation target in a sustainable and stable manner seems to be gradually increasing.

Later on Wednesday, the final US ISM Manufacturing PMI report and the latest Fed meeting minutes will be released. On Thursday, Japan’s Jibun Bank Manufacturing PMI will be released. Japan’s Jibun Bank Services PMI and Consumer Confidence are due on Friday. The U.S. Nonfarm Payrolls (NFP) will be a closely watched event and could provide a clear direction for the USD/JPY pair.