- Yesterday, bears attempted to push the USD/JPY currency pair lower, but losses did not exceed the 149.70 level before settling around 150.00 at the time of writing the analysis.
- It is also ahead of the reaction to the first testimony of US Federal Reserve Chairman Jerome Powell, the first most important event for USD pairs.
- Recently, the dollar's gains against the yen this week did not exceed the 150.65 resistance level.
- Overall, the divergence between the US Federal Reserve and the Bank of Japan's negative interest rate policy so far will remain an important factor in maintaining the upward trend of the currency pair.
Economic Outlook
The US Services PMI reading came in at 52.6 in February, down from 53.4 in January and below consensus expectations of 53. Also, the composite index pointed to growth in February for the 14th consecutive month after a reading of 49% in December 2022, the first contraction since May 2020.
Meanwhile, the employment index contracted for the second time in three months, to 48%, a decrease of 2.5 percentage points from the 50.5% recorded in January. Thus, these contractions indicate a moderation in the pace of US economic growth and represent a rare disappointment for investors who are accustomed to the economy pumping out positive surprises after positive surprises. In general, the price of the US dollar benefited from these surprises, as they led to a decline in expectations regarding the timing of the first US interest rate hike. Therefore, any hint of a shift in the data would suggest that the move has come to an end and the potential for building interest rate cut is coming into focus.
Ahead of key US jobs figures this week, analysts say, "The biggest threat to the Fed's goal of returning core consumer inflation to 2% is an exceptionally tight US Labor market that leaves companies no choice but to raise wages to attract and retain talent. As service companies continue to take the lion's share of consumer demand, they will continue to face the biggest challenge of balancing pricing pressures and demand."
USD/JPY Technical analysis and Expectations Today:
The general trend for the USD/JPY pair remains bullish, and the psychological resistance at 150.00 will continue to support the bulls' control. Technically, the support at 148.80 will represent the first station for breaking through the current upward channel of the currency pair. The direction will change downwards if it moves further towards the support level at 147.30. So far, regardless of Jerome Powell's testimony today and the US job numbers by the end of the week, we still prefer buying the USD/JPY currency pair from every downward level. Conversely, during the same period, the bulls' movement in the USD/JPY pair towards resistance levels at 150.85 and 151.40 will be in response to the technical indicators' movement towards strong overbought levels.
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