- For two days in a row, the price of the currency pair, the US dollar against the Japanese yen (USD/JPY), has been exposed to selling operations that pushed it towards the support level of 146.65 before settling around the level of 147.55 at the time of writing the analysis.
- Therefore, the recent gains of the general upward trend reached the resistance level of 148.80, the highest resistance level for the currency pair in nearly two months.
- Recently, the Dollar/Yen pair was affected by the recent announcement of the Japanese Central Bank, in addition to investors' appetite for safe havens.
On the economic front, after a long period of gloom, Americans are starting to feel better about inflation and the economy — a trend that could sustain consumer spending, fuel economic growth, and perhaps affect President Joe Biden's political fortunes. A measure of US consumer sentiment by the University of Michigan has jumped in the past two months by the largest amount since 1991. Recently, a poll conducted by the Federal Reserve Bank of New York found that Americans' inflation expectations have reached their lowest levels in nearly three years. The same survey, released last week, found that the percentage of those who expect their financial conditions to improve a year from now is at its highest level since June 2021.
Meanwhile, economists add that consumers appear to be responding to steadily slowing inflation, rising incomes, lower gas prices, and a rising stock market. Also, inflation fell from its peak of around 9% in June 2022 to 3.4%. According to the US Federal Reserve's preferred price measure, inflation has reached the Fed's annual target of 2% when measured over the past six months.
Moreover, employee salaries have exceeded the rate of inflation over the past year, thus making it easier for Americans to adjust to the rising cost of living. Last week, the government reported that the weekly income of the average worker — halfway between the highest and lowest incomes — rose 2.2% last year after adjusting for inflation. By that measure, inflation-adjusted wages are 2.5% higher than they were before the pandemic.
Ultimately, even with the steady slowdown in inflation, prices are still about 17% higher than they were three years ago, which is a source of dismay for many Americans. Although some individual goods are becoming less expensive, overall prices are likely to remain well above pre-pandemic levels. So, this dichotomy – a rapid decline in inflation while the cost of living continues to rise – is likely to raise a key question in the minds of voters, many of whom are still feeling the lingering financial and psychological effects of the worst bout of inflation in four decades.
However, economists uniformly warn that any attempt to do so would require a significant weakening of the economy, because of either sharp interest rate increases by the Fed or tax hikes. The likely result could be a recession that could cost millions of jobs.
USD/JPY Technical Analysis and Expectations Today:
Despite the recent selling operations, the general trend of the USD/JPY pair is still bullish, and there may be an opportunity to return to the psychological resistance of 150.00 if the currency pair moves above the resistance of 148.60 again. On the other hand, a first break of the general upward trend will not occur without the currency pair moving towards the support levels of 146.30 and 145.20, respectively. Today, USD/JPY pair price will be affected by the announcement of the US economic growth reading, in addition to the extent to which investors are willing to take risks or not.
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