USD/JPY hovers around cycle high on low volume session

The USD/JPY slightly retreated on Monday to the 141.80 area after hitting a multi-month high on Friday. US traders are celebrating Juneteenth and markets are relatively quiet. Investors seem to be consolidating gains after the USD/JPY pair increased more than 100 pips on Friday. The week’s focus remains on economic data from the US, released throughout the next sessions, Chair Powell's testimony before the US Congress and the Bank of Japan (BoJ) minutes out on Tuesday.

Economic data to start shaping July’s Fed decision, eyes on BoJ minutes

Last Wednesday, Jerome Powell stated that the Federal Reserve (Fed) opted for a hike pause, and that officials needed additional information to assess its implications on monetary policy. In that sense, US Housing data to be released on Tuesday, followed by Jobless Claims and S&P PMIs on Thursday and Friday, respectively, may impact their expectations regarding the next July meeting. In addition, Chair Powell’s testimony before Congress on Wednesday may trigger some reaction in USD price dynamics.

As for now, according to the CME FedWatch tool, investors are betting on a 75% probability of the Fed hiking by 25 basis points (bps) to the 5.25%-5.50% range on July 26.

On the other hand, the BoJ will release the minutes of its Friday meeting on Tuesday, where investors will get a better outlook of the bank's stance regarding monetary policy that could potentially impact the Yen.

USD/JPY Levels to watch

The USD/JPY has a bullish outlook in the short term, as per the daily chart. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both in positive territory, and the pair trades above its main moving averages, indicating that the buyers are in charge.

If USD/JPY manages to move higher, the next resistances to watch are at the 142.00 zone, followed by the 142.50 area and the 143.00 zone. On the other hand, the 141.50 area is the immediate support level for USD/JPY. A break below this level could pave the way towards the 20-day Simple Moving Average (SMA) at the 139.90 area and then to the 139.20 zone.