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USD/JPY analysis: Amid Profit-Taking Selling

Recently, Demand for the US dollar has calmed following disappointing figures for US inflation rates, which negatively affected the future of raising interest rates by the Federal Reserve. This is coinciding with the arrival of gains in the US dollar against the Japanese yen (USD/JPY) towards the 151.90 resistance level, its highest in a year, and the movement of technical indicators.

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    Meanwhile, towards strong levels of saturation with buying, all of them are common factors that helped initiate selling operations to take profits, pushing the currency pair towards the support level of 149.19 on Friday, before closing the week’s trading on a stable decline around the level of 149.57.

    The USD/JPY rate will react this week when the Federal Reserve on Tuesday releases the minutes of officials' latest policy meeting. In a press conference after central bankers stuck to their stance on US interest rates, Bank Chairman Jerome Powell hinted that policymakers may remain on the sidelines as they assess the economy and inflation. At the same time, the US economic data calendar is light during the Thanksgiving holiday week. Clearly, figures will be released Tuesday are expected to show that sales of previously owned US homes remained weak in October, when mortgage rates approached 8%. On Wednesday, the government will release a report on weekly unemployment claims and October orders for durable goods. S&P Global indices of manufacturing and services activity will conclude the week on Friday.

    According to Forex market trading, the widespread decline in the price of the US dollar came on the heels of news that more Americans lost their jobs and are seeking unemployment benefits than market participants expected. Also, it was reported that weekly unemployment claims in the United States rose by 231,000, more than the 220,000 the market was looking for, and higher than the previous reading of 218,000.

    The numbers indicate that the US Labor market continues to weaken, reinforcing expectations that the Federal Reserve will not raise US interest rates again but will soon consider lowering interest rates. Commenting on the economic report, “The jump in claims, to their highest level in 12 weeks, continues to rebound after the sharp decline in late summer,” says Ian Shepherdson, chief economist at Pantheon Macroeconomics.

    USD/JPY Technical analysis:

    The price of the USD/JPY has now declined, trading several levels below the 100-hour moving average line. Nearby, a late rebound on Friday helped the currency pair recover from 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 bearish channel. However, the MACD indicator on that period also appears to be supporting the downtrend after completing the bearish crossover. Therefore, the bears will look to extend the current decline towards 149.19 or lower to the 148.80 support. On the other hand, the bulls - the bulls - will look to pounce on bounces at around 150.23 or higher at the 150.74 resistance.

    In the long term, and according to the performance on the daily chart, it appears that the USD/JPY is trading within an upward channel. Moreover, the daily MACD appears to be struggling to gain momentum as it attempts a bearish crossover. Therefore, the bears will target potential pullbacks at around 148.12 or lower at the 146.08 support. On the other hand, the bulls - the bulls - will be looking to pounce on profits at around 151.78 or higher at the 153.76 resistance.

    USD/JPY (Daily Chart)

    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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