Later Monday, the New York Empire State Manufacturing Index will draw interest amid shifting sentiment toward the Fed’s rate path through the fourth quarter. Economists forecast the Index to drop from 11.9 in August to 3 in September.
A sharper drop may fuel speculation about a US recession, given that the manufacturing sector contributes about 20% to the US GDP. Rising recession risks would support a more dovish Fed policy stance, potentially pushing USD/JPY toward the 50-day Exponential Moving Average (EMA). If breached, 146.5 would be the next key support level.
Conversely, a higher reading may dampen expectations of multiple rate cuts in the fourth quarter. A less dovish Fed rate path may drive USD/JPY toward the 200-day EMA. A sustained move through the 200-day EMA would bring the 149.358 resistance level into play.
USD/JPY Scenarios: Hawkish BoJ vs. Dovish Fed Risks
Bearish USD/JPY Scenario: Hawkish BoJ rhetoric or weaker US manufacturing sector data could push USD/JPY toward 146.5.
Bullish USD/JPY Scenario: Dovish BoJ chatter or stronger US data could drive the pair toward 149.358.
