This is a strong bearish trading week for the performance of the USD/JPY currency pair. This happened as a result of which it collapsed towards the support level at 133.62, the lowest for the currency pair in three months. It closed the exciting week's trading, stable around the level of 134.30, the losses of the currency pair in the first place. This is amid investors abandoning the US dollar, amid calming the US Federal Reserve's tone about the future of the US interest rate policy in order to contain record inflation.
US Central Bank Governor Jerome Powell to calm market expectations
US job numbers came out stronger than all expectations. Instead of stepping up their bets on the December Fed meeting, traders have increased their bets on where rates will lead. The swaps showed a peak of 4.98 percent before a decline that still leaves the contract up eight basis points from where it was before the US jobs data. The current range is between 3.75 percent and 4 percent.
According to official figures, US employers added more jobs than expected and wages rose by the most in nearly a year. The number of US non-farm payrolls increased by 263,000 in November, while the unemployment rate held steady at 3.7 percent. Average hourly earnings rose twice as much as expected. That was why the Fed's "dot chart", which the US central bank uses to indicate its outlook on the course of policy, is in focus at the moment. Accordingly, Anna Wong of Bloomberg Economics says officials may have to boost their final interest rate forecast from what they wrote in September, perhaps to 5.25 percent.
Charles Evans, president of the Federal Reserve Bank of Chicago, said US interest rates will need to be raised even as the US central bank slows the pace of increases. He added that policy makers are likely to switch to 50 basis points after raising interest rates by 75 basis points in four consecutive meetings. Evans' comments are the latest from a US central bank official, including Powell earlier in the week, to suggest a half-point hike when they meet on Dec. 13-14.
Forecasts of the US dollar against the Japanese yen today:
- The recent performance of the USD/JPY currency pair was sufficient to push the technical indicators towards oversold levels.
- I prefer to think about buying the currency pair, waiting for the moment of a rebound upwards again, as the discrepancy in the future policy of the US Federal Reserve and the Japanese Central Bank is still in favor of the dollar in the end.
- The closest support levels for the currency pair are 133.20 and 131.80, respectively.
On the other hand, there will be no opportunity to confirm the change of the general trend to bullish without USD/JPY moving towards the psychological resistance level of 140.00 again.
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