The USD/JPY forecast is slightly bullish on Monday amid the dovish comments of the top BoJ official last Friday. Meanwhile, weak manufacturing data made the dollar drift sideways after a bearish close on Friday. 

Bank of Japan governor Kazuo Ueda made remarks on Friday that dampened hopes for a rate hike in March. He said it is too early to say Japan’s inflation will soon reach the 2% target. Therefore, the central bank will likely need more time to assess the state of inflation before reversing its monetary policy.

The most significant indicator of inflation trends in Japan is wage growth. The central bank needs evidence that wages are rising before considering hiking interest rates. As a result, markets remain uncertain about the outcome of the March 19 policy meeting.

On the other hand, the dollar was mostly range-bound after it fell on Friday due to poor economic data. A report revealed that US manufacturing contracted in February, indicating a slowdown in the economy. This pushed up rate-cut bets, which was also a sign that high interest rates were slowing the economy. Therefore, the Fed might be more open to cutting rates in June.

USD/JPY key events today

There are no high-impact economic releases on the USD/JPY calendar today. Therefore, the pair might drift sideways.

USD/JPY technical forecast: Consolidating below critical 150.86 level

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USD/JPY 4-hour chart

On the technical side, the USD/JPY pair remains range-bound below the 150.86 key resistance level. At some point, the price attempted to break below the range support. However, it closed inside the range, making a big wick. This is a sign that bulls are not ready to give up control. 

Still, the bullish momentum has weakened. Notably, the price is chopping through the SMA and the RSI through the 50 mark. This shows a ranging market. Moreover, the RSI has made a bearish divergence, indicating weaker bullish momentum. If the divergence plays out, the price will collapse to retrace the previous bullish move. On the other hand, if bulls regain momentum, the price could break above 150.86.

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