- Despite the US dollar's gains easing after the release of the minutes of the last meeting of the US Federal Reserve, the USD/JPY currency pair remained bullish, stabilizing above the psychological resistance of 150.00 and reaching the resistance level of 150.45 this week.
- Therefore, the performance was primarily amid the weakness of the Japanese yen after the decline in speculation about the imminent policy shift of the Japanese central bank.
In contrast, incoming data continues to point to a hot US economy, with economic growth on track to reach 3% this quarter, a historically tight Labor market, and persistently high inflation readings. Furthermore, nothing has really changed on the macro front, suggesting that the US dollar's decline may just be a setback in a broader uptrend, supported by the US economy outperforming the rest of the world's economies.
Meanwhile, technical recessions in the UK and Japan, stagnant growth in the euro zone, and the fallout in China's real estate sector point to the US dollar as a safe haven despite the record pace of US Federal Reserve tightening.
Since the last FOMC meeting, Fed officials have called for patience on interest rates, pointing to the resilience of the US economy and warning that early rate cuts could increase the risk of inflation becoming entrenched. Recently, the issued data has supported this view, with consumer and producer prices rising more than expected in January.
Fed officials did not have access to this data when they met, but sometimes minutes are "massaged" after the event to highlight certain points that the Fed wants to get across. In this case, the underlying message may be that the US economy has become too hot for the Fed to cut interest rates soon. Consequently, this is a signal that could put the wind back in the sails of the US dollar.
On the other hand, assets exposed to the Chinese economy have re-emerged after the significant reduction in mortgage interest rates this week to stimulate the country's faltering real estate market. Also, Chinese stocks and China-sensitive currencies such as the Australian and New Zealand dollars were the main beneficiaries. Despite the newfound optimism, it is difficult to say that this cut in interest rates will be enough to turn the tide in the real estate sector, which is dealing with the toxic consequences of decades of disinvestment and overinvestment. Unless Beijing rolls out real aggressive fiscal stimulus to complement low interest rates, this recovery may be just another dead recovery.
USD/JPY Technical Analysis and Expectations Today:
According to the performance on the daily chart above, the general trend for the USD/JPY pair is still bullish and will remain so as long as it remains stable above the psychological resistance of 150.00. Moreover, the technical indicators will move towards strong saturation levels of purchase if they move towards the resistance levels of 150.85 and 151.50, respectively. The strength of the US dollar continues, which may guarantee a new bullish trading week for the currency pair. On the other hand, over the same period, the trend will not be broken without moving towards the support level of 148.80 again.
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