- At the end of last week's trading, the price of the US dollar headed to record its best week against the yen in three months, as the USD/JPY pair jumped towards the 151.60 resistance level, the highest resistance level for the currency pair in a year.
- The currency pair's gains increased after the markets' hopes for the arrival of the policy of raising rates evaporated.
- American interest rates reached their peak following the statements of several US Central Bank policy officials, led by the bank’s governor, Jerome Powell.
Hawkish FED Affecting the Market
During the past week, many US Federal Reserve policymakers, including Governor Jerome Powell, said that they were still not sure that interest rates were high enough to end the battle with inflation, comments that were considered hawkish by financial markets and which led to a rise in the price of the dollar. However, commenting on the statements and their impact, Tina Ting, market analyst at CMC Markets, said: “Powell’s speech was very hawkish, and that really affected sentiment.”
Remarks by Federal Reserve officials came after the US central bank left interest rates unchanged last week and strengthened expectations that rates could peak, which led to a decline in the dollar and Treasury yields. However, the dollar has regained its recent ground and is looking to post weekly gains of around 1.3% against the Japanese yen, its best performance since August. Carol Kong, a forex expert at Commonwealth Bank of Australia, said, "The dollar/yen USD/JPY rose last week and is now back above 151. This increases the risk of the Bank of Japan entering the forex market to strengthen the yen, but I think the markets are expecting no intervention unless the dollar/yen moves to around 152."
On the economic side, the dollar/yen “USD/JPY” pair is trading on the back of the latest economic data. The preliminary November Michigan Consumer Sentiment Index missed the expected reading of 63.7 with a reading of 60.4. UoM's initial 5-year inflation expectations for this period rose to 3.2%, up from 3% in the previous update. On Thursday, initial US jobless claims for the week ending November 3 exceeded expectations of 218,000 with a total of 217,000. Continuing claims for the previous week fell to 1.82 million with 1.834 million.
In Japan, the monetary base including certificates of deposit rose by 2.4% (year-on-year) in October, in line with expectations. The current Eco Watchers survey for October missed expectations of 50.1 with a reading of 49.5, while the outlook fell to 48.4 from 49.5 in the previous update. Earlier in the same week, Japanese cash earnings of workers for September exceeded the expected change (year-on-year) of 1% with a change of 1.2%, while total household spending for this period exceeded -2.7% with a change of -2.8% annually.
USD/JPY Trading Outlook
USD/JPY has now risen to trade several levels above the 100-hour moving average line. As a result, it appears that the currency pair is about to enter the overbought levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within an ascending channel formation. However, the MACD over that time frame seems to be having difficulties gaining momentum after completing a bullish crossover. Therefore, the bears will target potential pullback profits at around 151.30 or lower at the 151.10 support. On the other hand, the bulls will be looking to extend the current rally towards 151.65 or higher to the 151.83 resistance.
In the long term, and according to the performance on the daily chart, it also appears that the USD/JPY is trading within an upward channel. The daily MACD also appears to be losing strength after completing a bullish crossover. Therefore, the bulls will target long-term profits at around 152.48 or higher at the 153.56 resistance. On the other hand, the bears will look to pounce on profits at around 150.37 or lower at the support level around 149.29.
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