- Since the start of trading this week, the USD/JPY pair has been on an upward bounce, with gains that have reached the resistance level of 146.26.
- At the time of writing, the pair is stabilizing around it, recovering from losses at the end of last week that reached the support level of 144.34.
- Moreover, after ignoring the hotter-than-expected US consumer price index report last week, investors betting on an imminent pivot from the Federal Reserve were encouraged on Friday by a very weak set of producer prices.
- Furthermore, the US final demand producer price index rose on an annual basis in December, but the 1.0% figure came in below the expected reading of 1.3%, while the core producer price index fell more than expected.
Meanwhile, the markets seem to believe that components of the consumer price index, such as housing costs, which boosted prices in December, will not keep headline inflation elevated for very long. However, the weak producer price data eases the view that underlying inflationary pressures in the US economy continue to rise.
Expectations of an end-of-year interest rate cut rose to more than 165 basis points after the data, while the odds that the Fed will begin a US rate-cutting cycle as early as March rose to more than 80%. Moreover, the biggest threat to disrupt these cautious expectations this week is the US retail sales numbers tomorrow, Wednesday, and if December proves to be a strong month for the American consumer. Also, there is a risk that Fed officials will try to rein in aggressive bets when they take the podium in the coming days, starting with Governor Waller on Tuesday.
Recently, US Treasury bond yields have come under renewed pressure as investors raised their expectations about the number of times the Federal Reserve will cut interest rates this year. Previously, the yield on 10-year bonds ended Friday at 3.95% - its lowest level in more than a week. Therefore, with US markets closed on Monday for Martin Luther King Day, the yo-yo movement in the Fed funds futures market did not generate the usual buzz in the equity and forex arenas.
At the same time, the price of the US dollar was creeping higher during the past two sessions, with more buyers entering European trading today. Obviously, one explanation for why the dollar has not fallen behind yields is the fact that other central banks are also expected to cut their borrowing costs this year sharply, so yield spreads have not narrowed significantly in Favor of other major currencies such as the euro. Also, there may be some caution at the start of the new trading week amid China announcing its fourth-quarter GDP estimates on Wednesday and a number of countries publishing CPI data, including Canada, Japan and the United Kingdom.
USD/JPY Technical Analysis and Expectations Today:
According to the performance on the daily chart above, the price of the US dollar against the Japanese yen “USD/JPY” is moving within a recently formed ascending channel. Technically, breaking the resistance at 147.50 will support the strength and control of the bulls over the trend. At the same time, expectations will increase for a return to the psychological resistance of 150.00 again. On the other hand, bullish expectations will be affected if the USD/JPY pair price returns below the support at 144.20. finally, we still prefer to buy the currency pair from every falling level.
Ready to trade our daily Forex forecast? Here’s a list of some of the best regulated forex brokers to check out.