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USD/JPY Technical Analysis: Bulls are Trying to Control

For three consecutive trading sessions, the USD/JPY currency pair settled in a range between the 132.26 level and the 135.10 resistance level, in a neutral position. This is in light of the environment of successive US interest hikes to contain record US inflation.

The USD/JPY currency pair settled around the 133.40 level at the time of writing the analysis.

USD/JPY Economic Outlook

US consumers slashed their spending in February after a buying explosion in January, underlining the volatility of the economic environment. For its part, the government said that US retail sales fell -0.4% after jumping 3.2% in January, supported by an increase in auto sales. US retail sales fell in November and December, the crucial holiday period. US retail sales figures for February were affected by a 1.8% decline in auto sales as well as declines in restaurants and stores that sell furniture and clothing. Excluding automobiles, sales fell 0.1% from January, according to the Commerce Department.

Sales in furniture stores fell 2.5%, while business in restaurants fell 2.2% in February compared to January. Sales at department stores fell 4%. But shoppers are spending more online and at electronics stores, health and beauty stores, and food retailers, according to the report.

Shoppers remain relatively resilient, getting a boost from a strong job market. America's employers added a solid 311,000 jobs in February, short of the huge gains for January. But they struggle as prices continue to rise on just about everything.

The government also reported this week that US consumer price increases eased slightly from January to February but still pointed to rising inflation, which poses a challenge to the Federal Reserve at a delicate moment for the financial system. Prices rose 0.4% last month, just down from 0.5% in January. However, excluding volatile food and energy prices, so-called core prices rose 0.5% in February, just above January's gain of 0.4%.

With the collapse of two major banks since Friday, sparking concern about other regional banks, the US Federal Reserve may, for now, focus more on boosting confidence in the financial system than on the long term to tame inflation. However, it remains to be seen whether news coverage of bank failures and stock market volatility will hurt consumer sentiment this month, Andrew Hunter, vice president of US economists at Capital Economics, wrote in a report released on Wednesday.

The first reading will come with the US Consumer Confidence Survey released by the University of Michigan on Friday. Economists said the biggest impact on consumers is likely to come from further tightening of credit conditions.

Forecasts of the US dollar against the yen today:

  • It seems clear that the bulls are trying to control the performance of the USD/JPY currency pair after the recent selling operations.
  • They may succeed in that if the currency pair returns towards the resistance levels of 135.40 and 137.20, respectively.
  • On the other hand, according to the performance on the daily timeframe chart below, breaking the support level at 131.90 will motivate the bears to move towards the next psychological support level at 130.00, which confirms the general trend turning bearish.

The dollar / yen currency pair will be affected today by the extent to which investors take risks or not, in addition to the reaction from developments on the ground regarding the future of the US financial system and the extent of the spread of infection globally, in addition to the announcement of the number of weekly US jobless claims, the reading of the Philadelphia Industrial Index and US housing numbers .

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Mahmoud Abdallah
About 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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