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- Amidst upward stability, the price of the USD/JPY currency pair began this important week’s trading stable around the resistance level of 149.62.
- Last week’s gains extended to the resistance level of 149.82, the closest point to testing the psychological resistance of 150.00, which increases with talk of imminent Japanese intervention in the markets to prevent further currency collapse.
- I still believe that the continued discrepancy between the policy of the US Federal Reserve and the Bank of Japan will ensure that bulls control the performance of the dollar against the Japanese yen currency pair until Japanese intervention in the markets occurs.
Federal Reserve VS Bank of Japan
On another level, there is a fair amount of economic data coming out of the US this week, although the impact of the data on the market has been somewhat dampened by the US inflation release last week, which sparked some notable market movements. Briefly, a hotter-than-expected basic services component of the inflation basket has investors betting that the Fed may have to raise US interest rates again, with December now favored.
Economic data has jolted the “higher for longer” interest rate trade back to life from a brief slumber, sparking a rise in US bond yields and the dollar.
This week question is how the data presented will contribute or detract from it. In addition to the economic data, there will be a stream of statements by US Federal Reserve policy officials led by the bank’s governor, Jerome Powell, which must be carefully monitored, as the picture will become clearer about the members’ intention in the bank’s upcoming meeting to determine the path to raising US interest rates.
At the beginning of this week's trading, US stock futures rose and Treasury yields fell as caution prevailed among investors tracking diplomatic efforts to contain the conflict between Israel and Hamas. Markets were broadly calmer yesterday after last week's rush into safe haven assets, as investors awaited further developments in the Middle East. The war poses an additional worry for traders already busy interpreting expectations for the economy and interest rates, just as the latest earnings reporting season gets into full swing.
Accordingly, S&P 500 index contracts rose by 0.3%, and Nasdaq 100 index contracts stabilized after declines in Wall Street markets at the end of last week. At the same time, European energy stocks received support from recent gains in oil prices, with Shell shares hitting a record high. In Asian markets, the region's stock index declined yesterday, with stocks in mainland China declining despite the Chinese central bank carrying out the largest medium-term liquidity injection since 2020. The People's Bank of China pumped a net 289 billion yuan ($39.6 billion) through facilities. Term lending kept the interest rate unchanged at 2.5%.
Expectations for the Dollar Against the Japanese Yen Today:
There is no change in my technical view of the performance of the US dollar against the Japanese yen (USD/JPY), as the general trend is still bullish, and the opportunity to move towards and above the psychological resistance of 150.00 is possible if the results of US economic data and the statements of Federal Reserve Bank officials are supportive of more US interest rate hikes, which widens the gap between it and the Bank of Japan. But at the same time, one must be wary of Japanese interference, and therefore it is better to sell from the highest levels without taking any risks.
If it occurs, the Japanese intervention will bring the USD/JPY currency pair one strong sell-off, changing its trend to bearish. The closest resistance levels to the current trend are 150.20 and 151.00, respectively. On the other hand, over the same time period, the support level of 147.30 will be important for causing a first break in the current upward trend.
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