For three trading sessions in a row, the bulls settle in the US dollar currency pair against the Japanese yen USD/JPY in the vicinity of the resistance level 140.91, its highest in six months. It settled around the level of 140.40 at the time of writing the analysis, prior to the announcement of the US consumer confidence reading, the first important US economic releases for this week, the most important of all-time US jobs numbers.
Prior to that, markets and investors reacted to a first agreement on the US debt ceiling. "It's the equivalent of an interest rate increase of just over a quarter of a point in terms of its impact on growth," Avery Shenfeld, chief economist at CIBC Capital Markets, said, referring to Monday's proposed agreement. This could take the pressure off the US Federal Reserve to rise again, or at least give them room to take a ride on the rally in June and wait until the July meeting to get a better picture of how the growth and inflation data will evolve. Assuming Friday's payroll data isn't too hot to handle."
The two-part proposal means less government borrowing and spending than otherwise in the coming years, so it could keep interest rate expectations from much higher and enable US Treasury bond issuance to resume without disrupting the bond market. To the extent that this is the case, the proposed agreement could strongly impact the USD/JPY, although this is by no means guaranteed.
“The deal caps federal spending and suspends the debt ceiling until January 1, 2025, after the next federal election,” Elsa Linus, forex analyst at RBC Capital Markets, wrote in a market commentary on Monday. And “The financial impact will be a small burden, but note that before the agreement, the United States was the only country in the Group of Ten that had a positive fiscal impulse this year and next, and even after the deal, the United States was not outside the financial barriers.”
Dollar expectations against the Japanese yen today:
- The general trend of the USD/JPY currency pair is still bullish.
- The stability is around and above the psychological resistance 140.00, confirming the bulls’ control over the trend.
- At the same time, the technical indicators are moving towards strong overbought levels.
- The US jobs numbers coming this week is disappointing, as the dollar / yen pair may be exposed to profit-taking sales at any time.
- There will be a first break of the current trend without moving towards the support levels at 138.80 and 137.00, respectively.
On the other hand, the US jobs numbers came in support of the path of tightening the US Federal Reserve's policy, as the bulls may find the opportunity for an upward breach that may reach the resistance levels at 141.70 and 142.35, respectively.
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