For four consecutive trading sessions, the price of the USD/JPY currency pair moved in a rebound path to the upside, with gains that stopped at the resistance level of 134.70. This was before settling around the level of 133.95 at the time of writing, at a time when the bulls are waiting for more stimulus to complete the current rebound. The future of the US Federal Reserve policy has the most influence on the performance of the US dollar against the rest of the other major currencies.
St. Louis Federal Reserve Bank President James Bullard said he favors continued US interest rate hikes to counter persistent inflation, while recession fears are exaggerated. "Wall Street is very caught up in the idea that there's going to be a recession in six months or something like that, but that's not really the way you read an expansion like that," Bullard told Reuters in an interview published on Tuesday.
US Federal Reserve policymakers decided to hike by a quarter point more this year, raising the benchmark interest rate to 5.1% according to their median forecast in March. Investors see this move happen at their May 2-3 meeting.
Overall, Reuters cited Bullard, who has not voted on rates this year, supports pushing interest rates 50 basis points above the median estimate, to a range of 5.5% to 5.75%. This is in line with a view Bullard made on March 24, when he revealed that he raised his forecast for where rates will peak. And while economists at the Fed were expecting a mild recession, according to the Fed's March meeting minutes, Bullard disagreed.
"The job market looks very, very strong," Pollard also said, according to Reuters. And that with the prospect of a hot job market supporting strong consumption, "it doesn't seem like this moment is the moment you would expect a recession in the second half of 2023."
Most Fed officials speaking in recent weeks highlighted the need to do more to bring price pressures back to their 2% target, amid signs of persistent inflation and easing of banking turmoil last month. Small businesses are most at risk from the recent banking turmoil in the United States.
Small businesses in county towns account for about a quarter of output from the world's largest economy and are likely to be hardest hit by tougher lending standards stemming from last month's troubles in the banking sector, according to research from Goldman Sachs. It is widely expected that lenders of all sizes will become more cautious about extending credit to avoid getting into trouble in the event of any unexpected surge in demand for deposits back in the coming months.
This comes after "bank-management" behavior among corporate clients resulted in Silicon Valley Bank and Signature Bank not being able to immediately fill deposit orders in March, something that has the potential to have far-reaching implications for the US economy. Small US firms with fewer than 100 workers employ an estimated 35% of the US private sector workforce, tend to generate about a quarter of total economic output but would be disproportionately exposed to any tightening of credit conditions among small and medium-sized banks.
This is because in the United States nearly three-quarters of small business loans are made by small and medium-sized banks with assets of less than $250 billion, with a large portion of those loans coming from smaller institutions that often have less than $10 billion in assets. In total. The biggest problem facing these companies and the major risks to the US economy is that many companies will not easily be able to replace the financing provided by smaller banks because the large competitors have only limited geographic footprints and business relationships outside of major metropolitan areas.
Forecasts of the US dollar against the yen today:
- There is no change in my technical view of the performance of the currency pair.
- According to the performance on the daily chart below, the price of the USD/JPY currency pair is still at the beginning of forming an ascending channel that lacks more motivation to confirm the bullish shift.
- This requires a rebound towards the resistance levels 145.40 and 147.30, respectively.
On the other hand, and for the same period of time, the return of the dollar / yen currency pair to the vicinity of the support level 132.20 will be important for the return of bears control over the trend. I still prefer to buy the currency pair from every downward level. There are no important US economic data today, and the focus will be on the content of the statements of some US Federal Reserve policy officials.
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