- The bullish retracement path of the USD/JPY currency pair this week was capped by testing the resistance level 135.50 before settling around the 135.10 level in the beginning of trading today, Thursday.
- The dollar yen gained further after the release of the minutes of the latest meeting of the US Federal Reserve. and US retail sales figures.
- US central bank officials saw signs of weakness in the US economy at their last meeting, but still described inflation as "unacceptably high" before raising the benchmark interest rate by a significant three-quarters of a point in their quest to slow price increases.
The pace of sales at US retailers was reported unchanged last month as persistently high inflation and rising interest rates forced many Americans to spend more cautiously. Retail purchases were flat after rising 0.8% in June, the Commerce Department reported, and economists had been expecting a slight increase.
However, yesterday's report contained some positive signs: Excluding autos and auto parts, retail sales rose 0.4% in July. Lower gas prices will likely free up money for people to spend elsewhere. Gasoline sales fell 1.8%, reflecting lower pump prices. Sales of building supplies and garden equipment were halted, as were sales in electronics and hardware stores. Meanwhile, consumers remained wary of spending too much on non-essentials: sales fell 0.5% in supermarkets and 0.6% in clothing stores.
Compared to the previous 12 months, total US retail sales rose 10.3% in July.
Inflation Affecting US Economic Activity
American consumers, whose spending accounts for nearly 70% of US economic activity, remained mostly resilient even as year-round inflation neared four-decade highs, growing economic uncertainty and rising costs for mortgages and money borrowing. However, public spending has weakened, increasingly turning towards things like groceries, and away from less important things like electronics, furniture, and new clothes. The government's monthly report on retail sales covers about a third of all consumer purchases and does not include spending on most services, from plane prices and apartment rentals to movie tickets and doctor visits. In recent months, Americans have shifted their purchases away from physical goods and more toward travel, hotel accommodations and plane rides.
Inflation continues to be a severe struggle for many families. Although gasoline prices have fallen from their highs, food, rent, used cars and other necessities are becoming much more expensive, exceeding any wage increases that most workers have achieved. Despite the US labor market, which remains strong, the US economy contracted in the first half of 2022, raising fears of a possible recession. Growth has been weakening largely as a result of higher interest rates by the Federal Reserve, which are intended to calm the economy and tame high inflation.
US Dollar Against Japanese Yen Forecast
On the daily chart, technical indicators are heading higher, which provides the momentum for the USD/JPY currency pair. Besides, the momentum factors for the stronger US dollar, which is still a safe haven, and the economic performance of the United States supports the path of tightening the Fed’s policy, and we do not forget that the dollar pair Yen headed towards its highest in 25 years and was the closest to testing the psychological peak of 140.00. Technical indicators have not yet reached overbought levels, so no profit-taking is expected.
On the downside, the closest support levels for the dollar pair are 134.20 and 133.00, respectively. The US dollar will be affected today by the announcement of the Philadelphia manufacturing index, the number of jobless claims, and then the US existing home sales.
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