- For the second consecutive day, the USD/JPY currency pair is trading under selling pressure, pushing it towards the support level of 153.59 this morning.
- It then settled around the resistance level of 154.40 at the time of writing the analysis.
- Recently, yen has risen to its highest level in nearly two weeks amidst broader weakness in the US dollar, driven by recent economic data that has boosted bets that the Federal Reserve will start cutting interest rates in September.
According to the results of the economic calendar data, general and core inflation rates slowed in the United States of America in April, with retail sales stagnating unexpectedly. Moreover, the gap between US and Japanese yields narrowed further, supporting the Japanese yen. The currency also rose despite weaker-than-expected GDP data in Japan. The country's economy contracted at an annual rate of 2% in the first quarter of 2024, which is worse than market expectations of a 1.5% contraction, with private consumption declining for the fourth consecutive quarter. Moreover, the latest numbers complicate the position of the Bank of Japan, which needs to balance its support for the economy with efforts to defend the weak currency.
The price of the yen jumped by more than 1% against the US dollar after the reading of consumer price growth in the United States of America showed a decline in inflation pressure. The yen's rise came with a decline in the Bloomberg US dollar gauge and US Treasury bond yields in the session after the release of the US Consumer Price Index report for April. Furthermore, the data revealed that the so-called core measure of inflation rose by 0.3% compared to March.
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USD/JPY Technical Analysis and Expectations Today:
Based on the performance on the daily chart, despite recent selling operations, the general trend of the USD/JPY exchange rate remains upward. Technically, this trend will not be broken without bears pushing the currency pair towards the support levels of 152.00 and 150.00, respectively.
Given the ongoing disparity between the policies of the US Federal Reserve and the Bank of Japan, as well as the economic performance, I expect the USD/JPY rate to return to its upward path. Currently, the nearest support levels for the recent movement are 153.90 and 152.80, respectively. Ultimately, returning to around the resistance level of 156.60 will strengthen the bulls' incentive to move towards new record levels.
Today, the currency pair will react to the announcement of the latest US inflation numbers, along with today's announcement of the weekly US jobless claims, housing market figures, industrial production data, and statements from several Federal Reserve officials.
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