In the last two trading sessions of last week, the price of the USD/JPY currency pair was subjected to selling operations that pushed it toward the support level at 141.55, based on the resistance level of 143.88. The recent US job numbers helped in selling the US dollar against the rest of the other major currencies. This week's trading started stable around the level of 141.73.
As I mentioned before, the clear discrepancy between the policy of the US Federal Reserve and the Bank of Japan, which has negative interest rates, will remain an important factor for the bulls' continued control and buying of the currency pair from every downward level.
A closely watched measure of US inflation is likely to indicate more moderate price growth that the Fed wants to see sustained. The US consumer price index is expected to have risen 0.2% in July for the second month after excluding food and energy costs, the smallest consecutive gain in two and a half years. Economists and Fed officials view this core measure as a better indicator of core inflation.
Compared with a year earlier, the Labor Department's core gauge is expected to rise 4.8%, according to the median projection in a Bloomberg survey of economists ahead of next Thursday's report. While this is similar to June, the number is likely to decline in the coming months because core inflation accelerated in August and September last year. For the aggregate CPI, which includes food and energy, the so-called fundamental effects will work in the opposite direction. The annual CPI is expected to rise to 3.3%. That's because, in July last year, the measure started to ease from a peak of 9.1%.
A core CPI that confirms further inflation reduction will be consistent with market expectations that the Fed will delay raising US interest rates in September after a quarter-percentage-point increase last month. Officials will take an additional look at a variety of price data ahead of the next policy meeting in September.
US jobs data for July missed the expected number of 200k by a count of 187k. On the other hand, the average hourly earnings growth for the period exceeded the expected change (monthly month) of 0.3% with a growth rate of 0.4%. The equivalent (YoY) also beat the expected change of 4.2% with a change of 4.4% recorded. The country's unemployment rate for the month of July fell to 3.5% from 3.6% in June, beating the expected rate of 3.6%.
USD/JPY Technical Outlook
- The price of the USD/JPY has now declined to trade a few levels below the 100-hour moving average line.
- As a result, it appears that the currency pair is about to enter the oversold levels of the 14-hour RSI. In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a limited bearish channel formation.
- This indicates a significant short-term bearish bias in market sentiment. Therefore, the bears will target more declines at around 141.22 or below the support at 140.68. On the other hand, the bulls - the bulls - will be looking to pounce on profits around 142.41 or higher at the 142.93 resistance.
In the long run, and according to the performance on the daily chart, it appears that the USD/JPY is trading within the formation of an ascending channel. This indicates a significant long-term bullish bias in market sentiment. Therefore, the bulls will look forward to riding the current rally toward the resistance at 143.86 or higher at 146.25 resistance. On the other hand, the bears will look to pounce on the gains at around 139.45 or below the support at 137.06.
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