Despite three trading sessions during which the price of the USD/JPY pair was subjected to selling operations, it moved towards the 134.75 support level. The general trend of the currency pair is still bullish, stabilizing around the 135.20 level at the beginning of this week’s trading. The US dollar pairs are awaiting the announcement of the content of the minutes of the last meeting of the US Federal Reserve, then the US job numbers. The US dollar is still the strongest with expectations of more US interest rate hikes during 2022.
US Federal Reserve Chairman Jerome Powell was not shy when he welcomed last Wednesday the extent to which financial markets could understand the Fed's future guidance and the speed with which it moved to the rate in the series of interest rate hikes now underway. However, he also said nothing to encourage markets to go further than they already did, instead making it clear that everything about the Fed's interest rate prospects depends on the path that US inflation takes over the coming months.
"I think people will look back on this period and say we were able to tighten financial conditions quite a bit, and we've only had three meetings where we raised interest rates," Powell added. However, the forward price curve is priced in a price path much like the summary of economic forecasts my colleagues and I presented in June, and that's a good thing. This is understanding the market and finding credibility in what we write and of course it is all very conditional but nevertheless I would say it is a positive thing.”
As I mentioned earlier, we are deeply committed to using our tools to bring down US inflation. The way to do that is to slow the growth, ideally keep it positive, and as I mentioned, supply and demand return to equilibrium. This is what we are trying to achieve. Is there a risk that we will go too far? Certainly there is a risk but I do not agree that this is the biggest risk to the economy. He later added that the biggest mistake we must make is the failure to restore price stability.
The Japanese yen sale remains one of the hottest major trades after BoJ Governor Kuroda sent a message at the last policy meeting in June that it was too early to cut stimulus.
The G10's worst-performing currency this year fell to 137 against the dollar last week, its lowest level since 1998. Analysts at Credit Suisse Group AG had forecast a drop to 138 over the next three months as JPMorgan Chase & Co. looks to the possibility of a move towards the top of the world. 140.00 . Commenting on this, Win Thein, a New York-based forex analyst at Brown Brothers, wrote in a note: "Keeping the BOJ cautious, we continue to believe that the pair will eventually test the August 1998 high near 147.65." However, the volatility of the Japanese yen is closely related to Treasuries and the demand for the dollar. Peak US rate hike expectations in the coming months may calm some nerves and fears of a recession that could spur a rally in safe haven assets including the yen.
USD/JPY Forecast Today
The general trend of the USD/JPY pair is still bullish, and any selling did not take it out of the trend. This may happen initially by breaching the support level 130.00. As I mentioned before, the bulls will have the opportunity to move towards the historical psychological top 140.00 in the event that the bulls return to breach the resistance 137.00 again as It happened last week. The dollar's yen gains brought it to its highest in 24 years. Today is a holiday in the US financial markets, and therefore I expect limited movements of the dollar-yen, during which it is affected only by the extent to which investors take risks or not.
