As investors await fresh cues from the US ISM PMI, the USD/JPY pair fails to surpass 131.00

As the USD/JPY pair strives to surpass the critical level of 131.00 in the early Tokyo session, it is facing increasing resistance. The asset is trading near its 12-day low, therefore investors are likely to maintain a state of apprehension.

Due to the market's need for sufficient time to settle after the holiday fervor and long weekend, the risk profile is still uncertain. As the U.S. equity market awaits the International Monetary Fund's economic estimates, S&P500 futures perform modestly (IMF).

On a CBS Sunday morning news broadcast, IMF Managing Director Kristalina Georgieva warned, "2023 will be a difficult year for the majority of the global economy, as the three engines of global expansion — the United States, Europe, and China – may all experience declining activity."

In the future, the sentiment of the market will be reflected in the trading volume of the US Dollar Index (DXY). The ISM Manufacturing PMI data from the United States will be the most crucial element on the USD Index. Predictions indicate that the US ISM Manufacturing PMI will increase to 49.6 from 49.0 in the most recent report. In addition, investors will monitor the New Orders Index, which provides insight into future demand in the United States. The economic data is projected to increase to 48.1, up from 47.2 in the previous release.

A continuation of Tokyo's ultra-lax monetary policy could have an impact on the Japanese Yen. The Bank of Japan (BOJ) has already established inflation targets close to 2% for fiscal years 2023 and 2024, necessitating further increases in pay rates and a steady flow of market liquidity to underpin aggregate demand.