Ella 
During the European morning on Tuesday, USD/JPY extended its upward move above the mid-146.00 level. The pair is currently trading around 146.72, up 0.16% on the day.
Japanese household spending posted its biggest drop in nearly two-and-a-half years. Japanese household spending fell 5.0% in July from a year earlier, the latest data on Tuesday showed, missing market expectations for a 2.5% fall. The data showed that Japanese household spending has fallen for the sixth straight month. Earlier, Japan’s monetary base data for August showed an increase of 1.2% year-on-year, compared with a decline of 1.3% in the previous reading.
Notably, the Bank of Japan (BOJ) has maintained an accommodative monetary policy while no longer controlling the yield curve. Bank of Japan board member Toyoaki Nakamura said last week that policymakers needed more time to shift toward monetary tightening. However, monetary policy differences between the United States and Japan may limit the downside for the USD/JPY pair for the time being.
In addition, Japanese Finance Minister Shunichi Suzuki said last week that while sudden movements in the currency were undesirable, there were no clear signs of market intervention to support a weak yen. However, the policymaker will keep a close eye on currency trends.
Following last week’s mixed economic data results, market participants are betting the Federal Reserve will take a less aggressive stance. The chance of keeping rates on hold at the September meeting remains at 93%, while the chance of a rate hike at the November meeting is about 38%, according to the CME FedWatch tool.
Regarding last week’s U.S. data, non-farm payrolls (NFP) came in at 187,000 in August, better than market expectations of 170,000 and the previous reading of 157,000. However, the unemployment rate fell sharply to 3.8%, below market expectations and the previous reading of 3.5%. The U.S. manufacturing PMI came in at 47.6, compared with the previous reading of 46.4, beating expectations of 47.0. With Wall Street closed today for Labor Day, the dollar’s upside appears limited.
Market participants will be closely watching U.S. factory orders released later in the day. Attention will shift to Wednesday’s U.S. ISM services PMI. On Friday, Japan will release second-quarter gross domestic product (GDP). Quarterly growth is expected to be 1.3%. Traders will find trading opportunities around the USD/JPY currency pair.
