USD/JPY flat above 111.00, ahead of US manufacturing data

• USD/JPY hovering around Friday’s close on a low volume session.
• Data ahead and trade wars could trigger volatility.

The USD/JPY pair recovered the lost ground and it rose back above 111.00. During the last hours, it has been moving in a 15-pip range between 111.00 and 111.15, around Friday’s close.

It opened the week with a bearish bias amid risk aversion with concerns about the trade war (US-China) and the no-deal regarding NAFTA (US-Canada). Also, Brexit jitters contributed to the negative sentiment. It bottomed at 110.83 and rebounded. The move to the upside was limited below 111.20.

Volatility remained low due to the holiday in the US. On Tuesday, manufacturing data will be released in the US (PMI and ISM) ahead of the key employment report on Friday. “It is difficult to work out what is happening with ISM manufacturing. It has been very high for a long time compared to both hard data and the Markit PMI manufacturing index. It remains our base case that ISM will fall over in the coming months and we expect that the index was 57.3 in August versus 58.1 in July”, said analysts at Danske Bank.

Short-term key levels to watch

The US dollar needs to rise back above 111.15/20, a congestion area for several moving averages in the 4-hour chart, including the 20-SMA. A consolidation on top could clear the way for an approximation to the next resistance area at 111.45/50.

On the flip side, the immediate support is the 111.00 area (short-term uptrend line). A break lower would clear the way for a test of Monday’s low at 110.85. The next support could be seen at 110.65/70 (last week low).