There is no doubt that the sudden change in the policy of the Central Bank of Japan caused a devastating tsunami for other major currencies against the Japanese yen.
- The share of the USD/JPY currency pair was the collapse towards the support level 130.56, its lowest in four months.
- It closed the week’s trading stable around the level of 132.80.
- The general price of the Japanese yen fell to its lowest in two decades against the Japanese yen.
- The future performance of the USD/JPY currency pair in the coming days will depend on the course of the policy of global central banks led by the Federal Reserve and the recent shift in the policy of the Japanese central bank.
From Japan, the National CPI for November beat the estimate (YoY) by 3.7% with a change of 3.8%, while the National CPI excluding food and energy edged out by 2.7% with a change of 2.8% (YoY). Prior to that, the Bank of Japan decided to keep the base rate unchanged at -0.1%.
News from United States of America
After hitting 40-year highs earlier in the year, price pressures are finally easing. The US personal consumption expenditures price index excluding food and energy, which Fed Chairman Jerome Powell emphasized is a more accurate measure of inflationary sentiment, rose 4.7% in November, down from 5% the previous month. The overall personal consumption expenditures price index rose 0.1% and rose 5.5% from a year ago, the lowest since October 2021 but still well above the central bank's target of 2%.
While this should come as good news for Powell and his colleagues, wage gains — particularly in the services sector — have remained stubbornly strong. Inflation-adjusted disposable income increased by 0.3%. Trade data showed that wages and salaries, unadjusted for prices, rose 0.5% for the second month.
While this has been a boon for American workers, officials see it as potentially troubling for the trajectory of price increases. Powell focused on offsets as evidence in the US central bank's fight against inflation, which could support the reason the Fed sees borrowing costs staying higher for longer than investors do.
Separate government data released on Friday showed other parts of the US economy showing a more pronounced impact than the Fed's most intense tightening cycle since the early 1980s. Orders placed with US manufacturers for non-defense capital goods excluding aircraft rose 0.2% in November after a sharp downward revision for the previous month, and total bookings for durable goods fell 2.1%, the most since April 2020. The US housing market, which is affected, may stabilize. Particularly affected by changes in interest rates, with mortgage rates falling from their highest levels in two decades. New home sales unexpectedly rose in November for a second month, though the data is very volatile.
University of Michigan data showed that US consumers are becoming increasingly optimistic about the trajectory of price pressures, with short- and long-term inflation expectations declining this month. This reflects easing price pressures and relief at the gas pump, which boosted sentiment, but the data reflects a high degree of uncertainty.
Technical forecasts for the US dollar against the Japanese yen:
In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a bullish channel formation. This indicates a significant short-term bullish momentum in market sentiment. Therefore, the bulls will target short-term profits at around 133.145 or higher at 133.621. On the other hand, the bears will look to pounce on the gains at around 132.30 or below at the support at 131.86.
On the long run, and according to the performance on the daily chart, it appears that the USD/JPY is trading within the formation of a descending channel. This indicates a significant long-term bearish momentum in market sentiment. Therefore, the bears will be looking to extend the current declines towards 130.40 or below to the support 127.83. On the other hand, the bulls will target long-term profits around 135.22 or higher at 138.12 resistance.
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