- The USD/JPY currency pair had a bearish trading week, with losses extending to the 146.48 support level.
- It stabilized at the beginning of the US inflation week around the 146.90 level.
- The overall performance was due to the decline of the US dollar against other major currencies, influenced by the testimony of US Federal Reserve Chairman Jerome Powell and the mixed US jobs report.
Closely watched annual wage negotiations in Japan have reached a critical stage with the release of the results of the main union group, Rengo, on Friday. These figures are expected to surpass last year's results, which were already the best in decades, paving the way for the Bank of Japan to end its negative interest rate policy either this month or next.
Japan's final fourth-quarter GDP figures will also be included in this headline on Monday. These are likely to be revised upwards, bringing the country out of a technical recession, which could be another green light for the Bank of Japan.
Economic Outlook
This week in the United States of America is headlined by the long-awaited US Consumer Price Index report for February, along with retail trade, industrial production, and the preliminary reading of consumer confidence in Michigan for March. Currently, US headline inflation is expected to remain unchanged at 3.1% in February, while the benchmark interest rate is expected to fall to 3.7%, the lowest level since April 2021. On a monthly basis, headline and benchmark interest rates are expected to rise. At rates of 0.4% and 0.3%, respectively. Also, US retail sales are expected to rise by 0.5%, partly reversing a 0.8% decline in January, while US manufacturing activity is expected to remain unchanged after a 0.1% contraction.
Furthermore, Michigan's Consumer Sentiment Index is expected to reach 76.9 in March, unchanged from February and slightly below the 2-1/2-year high recorded in January of 79. Also, attention will be paid to producer prices, foreign trade, business inventories, and expectations. Government Monthly Budget Statement, and New York Empire State Manufacturing Index.
Previously, the US dollar index continued its losses to 102.5 on Friday, its lowest level since mid-January, as the latest US jobs report showed that the labor market is showing signs of slowing. This is reinforcing bets that the US Federal Reserve is nearing a start to cutting interest rates. Ultimately, The US jobs figures for February came in above expectations, but job gains in both January and December were revised sharply, the unemployment rate unexpectedly rose, and wage growth slowed much more than expected. Investors are currently pricing in a nearly 57% chance of a 25-basis point cut in the US federal funds rate in June.
USD/JPY Technical analysis and Expectations Today:
Based on the performance on the daily chart there has been a clear breach of the overall uptrend for the USD/JPY currency pair. A break below the support level of 145.90 confirms bearish control over the USD/JPY direction. This is considering that the announcement of US inflation figures this week will have a strong impact on the future of the current downward trend. Technically, bullish control over the currency pair's direction will not return without a movement towards the psychological resistance level of 150.00 once again.
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