- The bulls’ control over the performance of the price of the USD/JPY currency pair increased during this week’s trading.
- The rebound gains to the upside extended to the 136.92 resistance level, the highest level for the currency pair for more than two months, and it settled around 136.30 at the time of writing the analysis.
So far, the US dollar is still the strongest against the rest of the other major currencies, amid expectations of raising US interest rates in light of the stronger and positive performance of the US economy and excluding the hypothesis of recession after eight US rate hikes by the US Federal Reserve.
US Consumer Confidence fell for the second month in a row as stubborn inflation and concerns about a possible slowing economy weighed on Americans. In this regard, the Conference Board reported on Tuesday that its consumer confidence index fell to 102.9 in February from a reading of 106 in January. The Business Research Group's Present Situation Index - which measures consumers' assessment of current business and labor market conditions - rose to 152.8 from 151.1 last month. The Conference Board's expectations index - a six-month measure of consumers' expectations for income, business and working conditions - fell to 69.7 in February from 76 in January. The Conference Board said a reading below 80 often indicates a recession in the coming year.
Consumers have been a mainstay of the US economy, unwilling to slow spending even as the Federal Reserve tightens monetary policy and signals more rate hikes in its attempt to cool the economy and bring down four-decade-old inflation. These price increases can make it more expensive to use credit cards or take out a loan to buy a home, car, or other purchase.
Earlier in February, the government reported that US retail sales jumped 3% in January after a two-month decline. Americans boosted their spending in stores and restaurants at the fastest pace in nearly two years.
But that confidence can be waning.
The Conference Board says consumers are showing early signs of declining spending, particularly on expensive items such as cars, major appliances, and homes. Vacation plans were also requested again in February. The Fed's favorite measure of US inflation rose last month at its fastest pace since June, a worrying sign that price pressures remain entrenched in the US economy and may prompt the Fed to continue raising interest rates well into the year.
Respondents to the Conference Board survey continue to express optimism about the stability of their incomes and the broader US labor market, which has held up well even as the Fed raised its benchmark borrowing rate eight times in the past year. The US unemployment rate fell to 3.4% in January, as companies added a whopping 517,000 jobs in the first month of 2022. There are still roughly two jobs for every unemployed American, and despite notable layoffs in the technology sector, there are still few applications.
The one thing Americans are in no rush to do is jump into the housing market. With the average long-term American mortgage rate of 6.5%, many potential homebuyers have been pushed to the sidelines because those higher rates mean hundreds of dollars per month in additional costs. The National Association of Realtors reported last week that home sales in January fell for the 12th straight month, to the slowest pace in more than a dozen years. January sales were down nearly 37% from a year earlier.
Forecasts of the US dollar against the yen today:
- According to the performance on the daily timeframe chart below, the general direction of the USD/JPY currency pair is still bullish.
- Take into account that its recent gains were sufficient to push the technical indicators towards overbought levels.
- The continuation of the momentum for the dollar from the upcoming US economic releases may give the bulls the opportunity to complete the path.
- Currently, the closest resistance levels are at 137.45 and 138.30, respectively, and the last level is important to expect the psychological resistance at 140.00 again.
On the other hand, the currency pair's move below the support level of 133.85 will be important for a first exit from the current trend. The US dollar will be affected today by the release of the US ISM Manufacturing PMI.
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