USD/JPY continues its upward momentum, rising for the fourth consecutive day and showing potential to reach 149

However, with US traders returning from a long weekend and a slew of US data expected this week, there could be some volatility ahead.

Australia's economic data released on Monday was disappointing, with manufacturing PMI, job adverts, and company profits all falling short. The PMI at 48.5 indicates the 18th month of contraction, though it was the slowest in three months. New orders declined, and vendor performance worsened at the fastest rate in two years. Job adverts dropped by 2.1% in August, marking the seventh consecutive decline, and company profits fell by 5.3% quarter-on-quarter, the steepest drop in four quarters. These figures make it challenging for the RBA to raise rates, despite their likely continued hawkish stance.

China's weak manufacturing PMI also impacted stock markets on Monday. Official data showed the PMI fell to 49.1 from 49.4, the fastest contraction since February. The Hang Seng index dropped by 1.7%, forming a bearish engulfing pattern and casting doubt on its four-week rally.

ECB members remain divided on the eurozone's growth outlook. While another rate cut in September seems likely, there is disagreement on whether the economy is heading for a recession or if inflationary pressures will persist, complicating future rate cut forecasts.

Last week, I noted that the US dollar was due for some bullish mean reversion. The US dollar index rose in the last three days of the week, aided by month-end flows, and a weaker yen allowed USD/JPY to climb for a fourth straight day on Monday.

USD/JPY has now surpassed the initial 146 target and could be heading towards the base of the falling wedge around 149. However, the daily RSI (2) is overbought, and with EUR/USD forming a bullish inside day and the US dollar index rally stalling, a minor pullback might be needed before USD/JPY continues higher. Additionally, upcoming US data could renew bets on a dovish Fed if it shows weakness.

The 1-hour chart shows a strong uptrend, though bearish divergences are present. Resistance was met at the weekly R1 pivot point. The 1-hour trend remains bullish above the 145.76 low, with the monthly pivot point at 146.25. I am looking for dips towards these levels for the next potential swing trade long opportunity.

In my weekly AUD/USD outlook, a small bullish inside day formed on Monday, closing just below the July high and the 68c handle. We have yet to see a daily close above these levels, despite three daily wicks providing false breaks higher.

The bias remains for a leg lower before the next move to 69c. However, the 1-hour chart is showing an uptrend, suggesting it might have another leg or two higher before the expected leg lower. Bulls could look for dips down to the weekly pivot point near 0.6870 for a move back to the July high or weekly R1 (0.6808). Alternatively, bears might consider fading into these levels or waiting for the RSI (2) to reach overbought before considering shorts.