Since the start of this week's trading, the price of the US dollar against the Japanese yen (USD/JPY) has been on a downward correction path. Thus, USD/JPY rushed towards the support level of 146.66 yesterday, the lowest for the currency pair in more than two months, before settling around the 147.20 level. at the time of writing the analysis, this level the downward correction path relatively. Recently, announcing the US economic growth reading, US economic growth for the fourth quarter was revised to reach an annual rate of 5.2%. By ignoring higher interest rates, American consumers spent enough to help push the US economy to a rapid annual growth pace of 5.2% in the July-September period. Previously, the government had estimated that the US economy grew at an annual rate of 4.9% in the last quarter.
However, in the current fourth quarter, economists say growth is likely to slow sharply due to the cumulative effects of higher borrowing rates on consumer and business spending. For example, TD Economics expects US growth in the October-December period to reach an annual rate of 1.8%.
Yesterday's second growth estimate for the July-September quarter confirmed that the US economy accelerated sharply from its rate of 2.1% in the April-June period. However, it showed that U.S., gross domestic product — total production of goods and services — grew at its fastest quarterly rate in nearly two years.
Also, according to the official announcement, consumer spending, the lifeblood of the US economy, rose at an annual rate of 3.6% in the period from July to September - still healthy but lower than the previous estimate of 4%. Moreover, private investment rose at an annual pace of 10.5%, including a 6.2% increase in housing investment, challenging rising mortgage rates. Recently, the US economy also received a boost from companies building inventories in anticipation of future sales, adding 1.4 percentage points to quarterly growth. Clearly, the third quarter growth was also driven by an uptick in spending and investment by governments at all levels – federal, state and local.
Overall, the US economy, the largest in the world, has proven its resilience even as the Federal Reserve has raised its benchmark interest rate 11 times since March 2022 to fight the worst bout of inflation in four decades. Dramatically, these high interest rates have increased consumer and corporate borrowing costs. Furthermore, it also helped ease inflationary pressures: US consumer prices rose 3.2% last month compared to 12 months earlier, a marked improvement from the 9.1% annualized inflation rate recorded in June 2022.
The US labor market has been slowing from the hot levels witnessed over the past two years. But it's still healthy by historical standards: Employers are adding an average of 239,000 jobs a month this year. Also, the unemployment rate has fallen below 4% for 21 straight months, the longest such period since the 1960s. Obviously, the combination of easing inflation and flexible employment has raised hopes that the US Federal Reserve can manage a so-called soft landing. Meanwhile, it raises interest rates enough to cool the economy and tame price increases without pushing the economy into recession.
Yesterday, the OECD forecast the US economy would grow just 1.5% in 2024, down from 2.4% in 2023. As, Federal Reserve interest rate increases – 11 of them since March 2022 – continue to constrain growth.
USD/JPY Technical analysis and Expectations Today:
According to the performance on the daily chart below, the downward shift in the price of the currency pair US Dollar against the Japanese Yen (USD/JPY) continues. Thus, considering that the movement towards the support level of 146.60 and below it supports the movement of the technical indicators towards strong saturation levels with selling. Therefore, it is possible to think about returning the purchase without risk. On the other hand, over the same period, the bulls will not regain control over the direction of the currency pair without moving towards the psychological resistance of 150.00 again.
