USD/JPY Technical Analysis: Japan Central Bank Policy Update

Mahmoud Abdallah

For the second day in a row, the price of the USD/JPY currency pair is exposed to profit-taking operations that pushed it towards the 109.96 support level before settling around the 110.10 level at the time of writing the analysis. The gains of the currency pair's bullish rebound this week pushed it towards the 110.82 resistance level, the highest for the currency pair in more than a month and a half.

The correction gains increased to the top after the US Federal Reserve announced this week about monetary policy decisions. This is during clear hints from the bank about the date of raising US interest rates sooner than previously expected and in light of the rapid economic recovery from the effects of the pandemic, amid distinct vaccination plans and a quick re-opening of the sectors of the US economy .

Yesterday it was announced that the number of Americans filing for unemployment benefits rose last week for the first time since April despite circulating evidence that the economy and labor market are steadily recovering from the pandemic recession. Accordingly, the US Department of Labor said that the weekly US jobless claims rose 37,000 from the previous week to 412,000 claims. With the labor market strengthening, the number of weekly applications for unemployment assistance has declined for most of the year. The number of jobless claims generally reflects the pace of layoffs.

Weekly claims for unemployment assistance have fallen for six straight weeks, and economists had been expecting another drop last week. However, the report showed that the four-week average of claims, which moderates the ups and downs from week to week, fell by 8,000 last week to 395,000 - the lowest four-week average since the pandemic hit the economy in March 2020.

A year ago, nearly 1.5 million people applied for unemployment benefits in one week.

With more vaccinations and more consumers venturing into spending — on restaurant meals, airline tickets, movie tickets and store purchases — the US economy is quickly recovering from the recession. All of this renewed spending has increased customer demand and prompted many companies to seek new workers, often at higher wages, and avoid layoffs. In fact, the speed of the recovery from the recession has taken many companies by surprise and led to a scramble for hiring. In May, employers added 559,000 fewer jobs than expected, evidence that many companies are struggling to find enough workers as the economy recovers faster than expected.

But many economists expect employment to catch up to demand in the coming months, especially as federal unemployment assistance programs end, and more people are pursuing jobs. They noted that the economy still has 7.6 million fewer jobs than it did before the pandemic.

The rapid spread of vaccines has brought the number of new confirmed COVID-19 cases down to just over 12,000, from about 250,000 per day in early January. And although unemployment claims have fallen since the beginning of 2021, when it exceeded 900,000, they are still high by historical standards. Before the pandemic crippled the US economy in March 2020, jobless claims were running at about 220,000 per week.

USD/JPY Technical Analysis: On the daily time frame, the stability of the USD/JPY currency pair around and above the psychological resistance 110.00 still supports the upside trend and increases the purchases to move towards stronger ascending levels. The closest targets for the bulls are currently 110.45 and 111.20, respectively. On the other hand, the currency pair will not abandon its current ascending path without moving towards the 108.80 support level, otherwise the general trend will remain to the upside.

The currency pair is not awaiting any important US economic data today. In Japan, the BoJ will announce an update on its monetary policy.

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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