The positive performance of the US dollar currency pair against the Japanese yen USD/JPY culminated yesterday in obtaining a strong and positive momentum for the US dollar. This came from the content of the testimony of US Central Bank Governor Jerome Powell. The testimony provided strength for the future of tightening the US central bank's policy with new and strong rate hikes for the US interest as the US economy is still far from recession yet.
The gains of the dollar/yen currency pair reached the resistance level of 137.16, which is stable around it at the time of writing the analysis, which is the highest level for the currency pair during the year 2023 trading.
For his part, US Central Bank Governor Jerome Powell said in prepared testimony before a Senate committee that the US Federal Reserve could increase the size of interest rate increases and raise borrowing costs to higher levels than previously expected if the evidence continues to point to a strong economy and persistently high inflation. . “The latest economic data came in stronger than expected, indicating that the final level of interest rates is likely to be higher than previously expected,” Powell added in his testimony before the Senate Banking Committee. And "If the aggregate data indicates that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."
The US Federal Reserve raised its benchmark interest rate by a quarter of a point in early February after imposing a half-point increase in December and four hikes of three-quarters of a point before that. Over the past year, the central bank has raised the key interest rate, which affects many consumer and commercial loans, eight times.
Most economists and investors on Wall Street expected the Fed to increase another quarter point when it meets next March 21-22. But in recent days, investors have been chasing the prospect of a half-point increase, according to futures markets. Powell's comments indicate a possible half-point increase in March. And in his prepared remarks on Tuesday, Powell walked back some of the bullish comments about declining inflation he made after the Fed's meeting on Feb. Steady slowdown in inflation - many times over. At that time, consumer price growth has slowed year-on-year for six consecutive months.
But after that meeting, the latest reading of the Fed's preferred measure of inflation showed that consumer prices rose from December to January by the most in seven months. Reports on employment, consumer spending and the broader economy also indicated that growth remains healthy.
Powell also added that such economic numbers "partially reversed the weak trends we saw in the data just a month ago/".
Forecasts of the US dollar against the yen today:
- The general bullish trend of the USD/JPY currency pair is increasing with strong momentum.
- Currently, the talk has returned about the future of the psychological top 140.00 again.
- According to the performance on the daily chart below, this can happen, especially if the bulls move in the currency pair towards the resistance levels 137.90 and 138.65 on straight.
- Sufficient peaks to push the technical indicators towards strong overbought levels.
On the other hand, and for the same period of time, the trend will not stop without moving the currency pair towards the support levels at 135.20 and 134.00, respectively. Today, the currency pair will be affected by the first US jobs data and the second testimony of US Central Bank Governor Jerome Powell.
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