At the end of last week’s trading, the price of the US dollar currency pair against the Japanese yen, USD/JPY, was exposed to profit-taking sales, pushing it towards the 144.92 support level. This was during statements by those responsible for the excessive collapse of the Japanese yen. In the same week, the currency pair tested the 146.56 resistance level, its highest in nine months, and closed trading stable around the level of 145.37. As I mentioned before, the general trend of the currency pair will remain bullish as long as the divergence persists between the aggressive US Federal Reserve policy and the Bank of Japan, which has negative interest rates.
On the economic side, the USD/JPY currency pair is trading affected by the results of the latest economic data, as US Initial Jobless Claims for the week ending August 11th exceeded the expected number of 240 thousand with the number of claims recorded at 239 thousand. Continuing claims for the previous week exceeded the estimated figure of 1.7 million with the figure slightly higher than 1.716 million. On the other hand, the Philadelphia Fed Manufacturing Survey for July beat the expected reading of -10 with a reading of 12.
In Japan, Q2 Preliminary GDP beat expectations (QoQ) at 0.8% with a change of 1.5%, up from 0.9%. GDP also rose year-on-year with a change of 6% from 3.7%, beating estimates of 3.1%.
- The strongest influence on the markets and investors this week.
- All eyes are on Jackson Hole to attend the annual symposium of the US Federal Reserve in Kansas City, which is attended by senior officials of global central banks.
- Everyone is privately wondering what US Central Bank Governor Jerome Powell - who is expected to speak Friday morning - might say.
For its part, the US central bank last week published the minutes of its July policy meeting, and the record showed that at that time, most Fed officials saw a significant upside risk to inflation, which in turn may require further tightening. On the other hand, two also favored holding rates flat, indicating the first real sign of disagreement about the way forward that we've seen in some time. Since that meeting, major economic data points have shown that price and wage pressures continue to dissipate, which should strengthen the case for ending interest rate increases. But we also saw continued strength in indicators of labor market activity and consumer spending, which may keep policymakers uneasy about prospects for a sustained reduction in inflation.
More generally, clarity about how Powell might weigh these developments is a critical question. Moreover, any clues about how the US central bank might consider a plan to cut interest rates in 2024 will also get a lot of attention. Otherwise, attendees will enjoy robust discussions on “Structural Transitions in the Global Economy,” the official theme for this year's symposium.
Technical analysis of the USD/JPY pair:
The USD/JPY currency pair has now declined to trade a few levels below the 100-hour moving average line. As a result, it appears that the USD/JPY is about to enter the oversold levels of the 14-hour RSI. In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a bearish channel formation. It appears that the MACD is about to complete a bearish cross indicating a shift in market sentiment from bullish to bearish. Therefore, the bears will be looking to extend the current decline towards 144.77 or below to support 144.40. On the other hand, the bulls will be looking for a bounce around 145.51 or higher at 145.85 resistance.
On the long run, and according to the performance on the daily chart, it appears that the USD/JPY is trading within a bullish channel formation. The MACD appears to be attempting a bearish cross, which indicates a possible pullback. Therefore, the bears will target long-term profits at around 143.51 or below at the support at 141.41. On the other hand, the bulls will look to extend the current rally towards the resistance 146.89 or higher to the resistance 149.00
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