- In the middle of the Japanese Central Bank's confirmation of its continuation of its easing policy this week, it was natural for the USD/JPY pair to lead all currencies against the yen to stronger bullish breakthroughs.
- The pair is stabilizing around the 151.00 resistance level at the time of writing the analysis, recovering from selling that it was exposed to following weaker-than-expected US employment numbers with losses that reached the 149.18 support level.
- Meanwhile, the pair returns to the vicinity of its highest level in a year, and as a result, talk of the proximity of the date of Japan's intervention in the markets to prevent further collapse of the currency may increase.
US Dollar Strong
In general, the US dollar continued to recover against all other major currencies, as many Federal Reserve officials reminded investors that the door to further increases remains open. Federal Reserve Governor Christopher Waller said that the US GDP growth rate of 4.9% for the third quarter was a “strong” performance that deserves close monitoring, while Governor Bowman said that she took the number as evidence that the economy has not only “remained strong”, but may also be gathering speed.
Although Waller did not specifically point to whether additional increases are needed or not, Bowman said that a growing economy may actually require a higher interest rate. In the same context, Chicago Federal Reserve Chairman Charles Evans and Minneapolis Federal Reserve Chairman Neel Kashkari reiterated that the rise in market-based interest rates is likely to represent a tightening of financial conditions, but neither ruled out additional increases.
However, despite the US dollar's recovery, investors were not largely convinced that the possibility of raising interest rates was back on the table. This is evident from the fact that, unlike the dollar, the yield on the 10-year US Treasury note fell yesterday, and according to the implied path derived from the Fed funds futures contracts, there is only a 15% chance of raising the interest rate by another quarter point. And about 90 basis points of rate cuts by the end of 2024.
Furthermore, the decline in yields may be due to a strong auction worth $48 billion in 3-year bonds with 10- and 30-year bond auctions scheduled to be held later this week. Also, what pushed investors to add more of their bets to the cuts was the disappointing US employment report released on Friday. Meanwhile, considering the broader economic performance, there is no justification for this large number of basis points to cut interest rates. Therefore, if the data on growth in the United States continues to point to a resilient economy, there is a wide range for upward adjustment and further recovery in the US dollar price.
USD/JPY Outlook
There is no change in my technical view of the performance of the price of the US dollar against the Japanese yen (USD/JPY), as the bulls’ control over the trend strengthens by moving above the psychological resistance of 150.00. At the same time, and as I mentioned before, talk will now increase about the approaching date for Japan’s intervention in the markets to prevent further collapse in the price of the currency, which greatly harms the Japanese economy.
Therefore, sell trades may be most appropriate to perform from the resistance levels of 151.75, 152.00, and 153.00, respectively. On the other hand, according to the performance on the daily chart below, breaking the support level of 148.20 is important for the bears to start controlling the trend. The price of the US dollar today will be affected by whether or not investors are willing to take risks, in addition to the reaction to the announcement of the number of weekly unemployment claims and new statements by US Central Bank Governor Jerome Powell.
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