It seems that the recent verbal intervention on the part of Japanese officials regarding the deteriorating exchange rate of the Japanese yen did not affect much the current collapse of the Japanese yen's price against the rest of the other major currencies at the end of last week's trading. The price of the USD/JPY currency pair jumped to the 145.06 resistance level above It is more than seven months old, and it is settling around 144.70 at the time of writing. As I mentioned before, the clear discrepancy between the aggressive US Federal Reserve policy and the Japanese central bank, the only global bank with negative interest, will remain supportive of a further collapse of the Japanese yen price. At the same time, Japan can intervene in the forex market at any time to stop the further collapse of the price of Japanese Yen.
The gains of the USD/JPY currency pair moved the technical indicators towards strong overbought levels on all timeframes, which guarantees profit-taking sales at any time, especially if a Japanese intervention occurs in the markets to support the Japanese yen. At the beginning of this week's trading, the currency pair has now declined to trade closer to the 100-hour moving average line. As a result, the currency pair appears to be approaching the oversold levels in the 14-hour RSI.
On the economic side, the USD/JPY currency pair is trading affected by the results of the latest economic data this morning. The quarterly Tankan survey of business confidence conducted by the Bank of Japan showed that large manufacturing in Japan strengthened in the second quarter of 2023 with a score of +5. This exceeded expectations for a reading of +3 and was higher than +1 three months ago. The outlook came in at +9, beating forecasts of +5 and up from +3 in the previous quarter. Large industrial capital expenditures are now expected to rise by 13.4 percent, canceling forecasts of 4.9 percent and increasing from 3.2 percent in the previous three months. The large index for non-manufacturers came in at +23, beating expectations of +22 and above of +20. The outlook was +20, below forecasts of +21 and higher than +15 three months ago.
On Friday, Japanese housing starts in May fell more than expected by -2.2% with a change of -3.5%. On Thursday, the Tokyo CPI for June missed the expected change (Yoy) of 3.8% with a change of 3.1%. The food and energy ex-period CPI also declined from the expected change of 4.4% with a change of 3.8% recorded.
In the US, the May PCE price index (MoM) missed the 0.5% expectation with a change of 0.1%. The equivalent (YoY) fell short of expectations by 4.6% with a change of 3.8% recorded. Elsewhere, the May PCE price index missed the expected change (MoM) by 0.4% with a change of 0.3%, while the equivalent (YoY) missed the estimate of 4.7% with a change of 4.6%. On the other hand, personal spending fell from expectations by 0.2% with a change of 0.1%, while personal income matched expectations with a reading of 0.4%.
USD/JPY Technical Outlook:
- In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY is trading within a limited bearish channel formation.
- This indicates a short-term bearish bias in market sentiment.
- Therefore, the bears will be looking to extend the current decline towards 144.01 or lower to 143.71. On the other hand, the bulls will look to pounce on the bounce at around 144.56 or higher at 144.89.
In 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 significant long-term bullish bias in market sentiment. Therefore, the bulls will target extended gains around 146.39 or higher at the 148.70 resistance. On the other hand, bears will target long-term profits at around 141.91 or below the support at 139.74.
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