- The stronger-than-expected US jobs figures, which confirm the strength and resilience of the US economy despite the US Federal Reserve's tightening policy path, helped the bulls maintain control of the USD/JPY performance with gains extending this week to the 148.90 resistance level.
- Clearly, that’s before the currency pair was subjected to selloffs, stabilizing around the 147.90 level at the time of writing the analysis.
What is expected for the dollar price in the coming days?
The US dollar will remain higher for longer as the US economy is now “magically” less exposed to rising interest rates than it has been for many decades now, while the same cannot be said for the rest of the world. That's according to new research by Deutsche Bank which finds that the main driver behind exceptional growth in the US is the economy's significantly lower sensitivity to interest rate hikes compared to the rest of the world. In this regard, George Saravelos, Head of Forex Research at Deutsche Bank, says: “Starting with the corporate sector, we can see that interest expenses continued to collapse “magically” during the third quarter of last year, significantly reaching their lowest levels since the early 1960s. “.
According to the analyst, US companies continue to make money from high cash holdings while paying interest on low-coupon fixed debt. Regarding households, Deutsche Bank notes that net financial liabilities remain below pre-coronavirus levels, the healthiest in more than three decades. The analyst adds, “American families are far from being exposed to financial pressure.”
In fact, Saravelos points out that the United States is the only advanced economy where interest costs have fallen sharply. With US companies and households less exposed to debt than in the past, is it any wonder that the impact of the US Federal Reserve's interest rate hikes is not halting the progress of the economy as many expected?
In these circumstances, it makes no sense for the market to price in similar cumulative interest rate cuts from the Fed, the European Central Bank, and many other central banks, as is currently the case, the analyst adds. The real debate is not whether the Fed will cut interest rates a few weeks sooner or later, but whether it will cut them less or more than the rest of the world over the next two years. Therefore, we still see risks leaning towards reducing federal easing and thus in Favor of the US dollar.
USD/JPY Technical Analysis and Expectations Today:
The current selling operations did not take the price of the currency pair US Dollar against the Japanese Yen (USD/JPY) out of the range of its most prominent ascending channel on the daily chart above. As we mentioned before, stability above the 148.60 resistance will increase expectations for the future of the psychological resistance 150.00, which confirms the control of the bulls, and at the same time it may move. Technical indicators are towards strong saturation levels for buying. Until now, we still prefer to buy the dollar pair against the Japanese yen from every falling level, and currently the closest support levels are 146.90 and 145.00, respectively. Finally, the continuing discrepancy between the policy of the Central Bank of Japan and the US Federal Reserve and economic performance will continue to support the upward trend for the currency pair.
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