For three trading sessions in a row, the price of the USD/JPY currency pair is exposed to profit-taking sale. This has been mentioned about the possibility of occurring at any time, after the strong and continuous gains of the currency pair in the recent period. These gains affected the resistance level 146.56, and the recent selling operations pushed it towards the level of 144.53. It settled around the level of 145.15 at the time of writing the analysis. The US dollar is cautiously awaiting the statements of US Central Bank Governor Jerome Powell tomorrow during the Jackson Hole Symposium.
A year ago, Federal Reserve Chairman Jerome Powell issued a stark warning: To combat persistently high inflation, the Fed would continue to sharply raise US interest rates, bringing "some pain" in the form of job losses and weak economic growth. Since Powell spoke at the annual conference of central bankers last summer in Jackson Hole, Wyoming, the US Federal Reserve has followed suit, raising its benchmark interest rate to 5.4%, its highest level in 22 years. This was followed by skyrocketing loan rates, making it difficult for Americans to buy a home or a car or for companies to finance expansions.
However, so far, on a large scale, not much pain has occurred.
Instead, the US economy moved forward. Employment remained intact, bewildering the legions of economists who predicted that higher interest rates would lead to widespread layoffs and a recession. The unemployment rate is near its lowest level in half a century. Consumer spending continues to grow at a healthy rate. As Powell and other central bankers return to Jackson Hole this week, the resilience of the economy has raised a new set of questions at the Fed: Is the key interest rate high enough to slow growth and dampen inflation? Will he need to keep interest rates higher for longer than expected to slow growth and tame inflation?
In this regard, said David Beckworth, a longtime Fed observer, a senior fellow at the Mercatus Center at George Mason University, a think tank, "It seems that the US economy is doing well, and inflation is declining." And “it looks increasingly likely that we will have higher growth and higher interest rates in the future.”
One by one, economists have either postponed or reversed their earlier predictions of a US recession. Optimism has been growing that the Fed will deliver a hard “soft landing” – bringing inflation down to its 2% target without triggering a severe recession. So nearly seven in 10 economists polled by the National Association for Business Economics say they are at least somewhat confident the Fed will deliver a soft landing, according to the latest NABE poll.
On Friday, Powell's keynote speech at this year's Jackson Hole conference will be scrutinized for any hints that the Fed intends to keep borrowing rates high for an extended period. Wall Street traders, who predicted earlier this year that the Fed would start cutting interest rates by the end of the year, now do not envision any rate cuts until 2024.
Meanwhile, optimism is growing in financial markets, not only about a soft landing, but also about accelerating growth. And last week, the Federal Reserve Bank of Atlanta estimated that the economy is growing at a staggering 5.8% annual rate in the current July-September quarter — more than double the pace in the previous quarter. This estimate is probably too high, but it still indicates that the economy is likely to accelerate from last quarter's rate of 2.4%.
Forecasts of the dollar against the Japanese yen:
- Despite the recent selling operations, the general trend of the USD/JPY currency pair is still bullish.
- Despite the arrival of all technical indicators towards strong overbought levels as a result of its gains, the pair is likely to test stronger peaks in the event that Jerome Powell's statements tomorrow support more hikes.
- US interest until inflation is contained and returned to the bank's goal.
- Currently, the nearest resistance levels, according to the current performance, are 146.00, 146.85, and 148.00, respectively.
On the other hand, if Jerome Powell's statements calmed expectations of further tightening of the Federal Reserve's policy, the dollar / yen currency pair may be exposed to strong profit-taking, and there will be no first breach of the trend without breaking the support 142.00. Today, the currency pair will be slightly affected by the release of the US weekly jobless claims, as well as the durable goods orders.
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