- The bearish pressure on the Japanese yen increased again, coinciding with the confirmation of the future tightening of the US Federal Reserve's policy.
- These are decisive factors for further bullish momentum for the USD/JPY currency pair, which reached the 143.88 resistance level, its highest since the beginning of November 2022.
- USD/JPY closed the week's trading stable near those gains.
- Accordingly, the rise of the currency pair is now to trade several levels above the 100-hour moving average line.
- As a result, it appears that the pair is about to breach the overbought levels of the 14-hour RSI.
On the economic side, the USD/JPY currency pair is trading affected by the results of recent economic data. The S&P Global Manufacturing PMI for June missed expectations of 48.5 with a reading of 46.3. The S&P Global Sevices Purchasing Managers' Index for the period outperformed the estimated reading of 54 with a reading of 54.1, while the S&P Global Composite PMI missed by 54.4 with a reading of 53. Elsewhere, US Initial Jobless Claims for last week were lower than the number of claims. Expected at 260k. They came in at 264 thousand, while the Chicago Fed National Activity Index for May missed the estimated reading of zero with a reading of -0.15.
In Japan, the Jbok Preliminary Manufacturing PMI for June missed the expected reading of 50.7 with a reading of 49.8. The Services PMI also fell short of the expected reading of 56.2 with a reading of 54.2. Prior to that, the national Japanese CPI for May missed the estimate of 4.1% with a change of 3.2% (YoY). The former National Food and Energy CPI also fell below 4.4% with a change of 4.3%, while the Fresh Food CPI was above 3.1% with a change of 3.2% (YoY).
US Central Policy
Atlanta Fed President Rafael Bostic made the dovish case for keeping US interest rates on hold, repeating his view that officials have already done enough to bring inflation down to their 2% target.
In remarks that contrast with the more hawkish message from Governor Jerome Powell and some other officials recently, Bostick said strong Fed tightening since March 2022 would be enough to calm prices. Bostick has emerged as one of the more pessimistic policymakers urging patience as officials grapple with soaring inflation, though most of his colleagues appear committed to continuing the most aggressive muscle-tightening campaign since the 1980s.
They held US interest rates steady at the latest meeting after 10 consecutive hikes, giving themselves more time to assess how the economy is responding to recent banking pressures and higher borrowing costs. But their latest forecast shows two more quarter-point moves this year, according to the average projection. Powell reinforced those expectations during congressional testimony, telling lawmakers repeatedly that officials expect prices need to rise to slow US growth and contain price pressures. He called the forecast a "very good guess" if the economy would perform as expected.
Investors, for their part, still aren't convinced officials will follow through. They expect one additional 25 basis point increase by the November meeting of the FOMC, as measured by interest rate futures pricing, and fully expect the Fed to cut interest rates by the March 2024 meeting.
Technical analysis of the USD/JPY pair:
In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY is trading within a bullish channel formation. This indicates a significant short-term bullish bias in market sentiment. Therefore, the bulls will be looking to ride the current wave of gains towards 144,134 or higher to 144,569. On the other hand, bears will target short-term profits at around 143.297 or below at 142.863 support.
On the long run, and according to the performance on the daily chart, it appears that the USD/JPY is trading within a sharp bullish channel formation. This indicates a strong long-term bullish bias in market sentiment. Therefore, the bulls will look forward to extending the current rise towards the resistance 144.897, or higher to the resistance 146.271. On the other hand, the bears will target long-term profits at around 142.328 or below at 140.834 support.
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