In the last two trading sessions for the year 2022, the price of the US dollar currency pair against the Japanese yen, USD/JPY, was subjected to strong selling operations. It rebounded from the resistance level 134.50 to the support level 130.76, and closed the year’s trading around the level of 131.10. The performance was mostly amid an uprising of the Japanese yen against the rest of the currencies. This performance, despite the first trading week of the year 2023, which is characterized by market holidays and lack of liquidity, will have a lot of important and influential economic data, led by the content of the minutes of the last meeting of the US Federal Reserve, and then the announcement of the US non-farm payroll numbers.
The latest US employment report is expected to highlight the resilience of the country's labor market through 2022, despite the sharpest pace of monetary tightening in decades. US salaries are expected to rise by about 200,000 in December, according to government data to be released next Friday. While this would mark a slowdown from the previous month, the pace of job growth still points to strong hiring and a generally strong labor market.
The continuing mismatch between labor supply and demand - something that is likely to be evident in the latest employment data on Wednesday - continues to add pressure on wages. Average hourly earnings are expected to have increased 5% in December compared to a year earlier in Friday's jobs report, well above the pace that is in line with the Fed's 2% inflation target. The US unemployment rate is expected to hold steady at a historic low of 3.7%.
Meanwhile, the record of the Fed's December meeting, released on Wednesday, could help explain the shift in the committee's view toward more rising inflation risks even amid signs of cooling. Other key US data includes the latest update on business activity in manufacturers and service providers from the Institute for Supply Management, as well as weekly numbers on unemployment insurance claims.
Forecasts of the US dollar against the yen today:
In the near term, according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a bearish channel formation.
- This indicates significant short-term bearish momentum in market sentiment.
- Therefore, the bears will look to extend the current declines towards support 130.551 or below to support 129.838.
- On the other hand, the bulls will be looking to pounce on profits around 131.698 or higher at the 132.474 resistance.
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 also indicates that the currency pair is facing a long-term bearish bias. Therefore, the bears will target long-term profits at around 128,528 or below at the support at 126,320. On the other hand, the bulls will target potential rebounds around 133.321 or higher at the resistance 135.653.
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