Since the start of trading this week, the price of the USD/JPY currency pair moved towards upward levels, after which it settled towards the resistance level 137.85, after a period of strong calm in the recent trading sessions. This bounce for the USD/JPY pair came before the announcement of a package of US economic data which is important and influential in addition to US monetary policy decisions.
Ahead of the announcement of important US inflation figures today. US Treasury Secretary Janet Yellen said that US inflation will be much lower by the end of next year 2023, as long as there are no unexpected shocks to the US economy. "I think US inflation will be lower," Yellen said during an interview on CBS' "60 Minutes." And “I very much hope that the labor market will remain completely healthy so that people can be satisfied with their financial resources and their personal economic situation.”
This year, the United States struggled with the worst inflation in four decades as the global economy dealt with post-pandemic demand and supply shocks in the wake of the Russian war in Ukraine. After peaking at 9.1% in June, US consumer inflation is expected to slow to 7.3% in November from 7.7% in the previous month, according to economists polled by Bloomberg News ahead of a government report released Tuesday.
The Fed is then expected to raise the key US interest rate by 50 basis points the next day, as well as a signal that further hikes are likely in the coming year. Asked about the inflation picture in the United States, Yellen said she hoped higher prices would be "short-lived," adding that she had seen positive signs including lower shipping costs and fewer delays in deliveries.
“We all realize that it is very important to get inflation under control and not become endemic in our economy,” she added. “We are making sure that does not happen.” Yellen added that the US economy remains vulnerable to shocks, but the banking system is healthy, along with the business and household sectors. She also said, "There is a risk of a recession, but it is certainly not in my opinion something necessary to bring down inflation."
Dollar expectations against the Japanese yen today:
- There may be a strong move coming this week amid cautious and strong anticipation of investors and markets for the decisions of the US Federal Reserve.
- The US inflation figures, which if they come out stronger than all expectations, the USD/JPY, with bullish momentum, may push it towards the resistance levels at 138.55 and 139.30, respectively.
- If the US inflation figures came in less than expected, the dollar pair against the yen may return to the recent support levels, which I see as an opportunity to think about buying the currency pair again.
The tightening tone of the US Federal Reserve this week is important for the future performance of the US dollar in the coming days.
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