Since the middle of last week's trading, the price of the USD/JPY currency pair has been in a downward correction. It is starting from the resistance level of 137.77, with losses affecting the support level of 133.50, and it closed the week's trading around the level of 134.85. According to the performance on the daily chart below, the price of the currency pair returned to a neutral area after the US dollar's gains stopped following the US Federal Reserve's decisions to limit the US interest rate hike, which was the cause of the collapse of a number of US banks.
Economic Outlook
The USD/JPY currency pair is trading affected by the results of the latest economic data, as the non-farm payrolls in the United States for the month of April broke the expected total number of jobs at 179 thousand, with a total increase of 253 thousand.
Average hourly earnings growth for the month increased by 4.4% (y-o-y) ahead of the estimated 4.2% growth, while the unemployment rate for the period fell to 3.4% down from 3.5% in March as well. This is ahead of the expected unemployment rate at 3.5%. The labor force participation rate for April increased slightly to 62.6% from 62.5% in March, beating the expected rate of 62.5%.
Elsewhere, US bank lending rose for the fourth consecutive week, indicating that credit conditions remain relatively stable despite growing concerns about regional lenders. According to the advertiser, commercial bank lending increased by $41.6 billion in the week ending April 26 after increasing by $12.4 billion in the previous week, according to seasonally adjusted data from the Federal Reserve released last Friday. The increase was driven by the largest increase in loans from small banks since December.
Deposits fell during the week to their lowest level since mid-2021, reflecting a decline in foreign institutions in the United States. Deposits in large and small US banks increased. Residential and commercial mortgage lending increased, along with consumer lending. Commercial and industrial loans have changed little. In Japan, the April monetary base missed the expected (yoy) change of 1.1% with a change of -1.7%. On the other hand, US Consumer Confidence for April surpassed the expected reading of 32.4 with a reading of 35.4, while the Gibbon Manufacturing PMI for the month matched the expected reading of 49.5.
Technical analysis of the USD/JPY pair:
- In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a bullish channel formation.
- This indicates a significant short-term bullish bias in market sentiment.
- Therefore, the bulls will be looking to ride the current rally towards 135.465 or higher to the resistance 135.923.
- On the other hand, the bears will target profits at around 134.336 or below at 133.895 support.
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 an ascending channel. This indicates a significant long-term bullish bias in market sentiment. Therefore, the bulls will target long-term profits at around 136.875 or higher at the resistance 138.677. On the other hand, the bears will target extended pullbacks at around 133.044 or below at support 131.193.
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