- Since the announcement of U.S. inflation figures falling below all expectations, the USD/JPY exchange rate has been experiencing strong selling pressure, moving towards the support level of 157.37, its lowest in nearly a month, stabilizing around 158.18 at the start of this week’s trading.
- The selling pressure originated from the resistance level of 161.80, marking the lowest level for the yen in 38 years.
On the economic side, Japan’s nationwide price growth is expected to strengthen to 2.7% in June data released next Friday, a result that could fuel expectations that the Bank of Japan will consider combining a reduction in bond purchases with a rate hike at its meeting later this month. Japanese workers’ basic wages jumped by the most since 1993, an encouraging sign that the underlying wage trend may start to support consumption and enable the Bank of Japan to raise interest rates again.
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On the US side, the so-called core US consumer price index – which excludes food and energy costs – rose 0.1% from May, the smallest gain in three years. The overall index fell for the first time since the start of the pandemic, weighed down by lower gasoline prices. Meanwhile, the distressed investors see buying distressed US real estate as one of their best opportunities in a generation, as the collapse of commercial real estate continues to roil the market. Nearly $1 trillion in commercial real estate debt is set to mature this year in the US, according to the Mortgage Bankers Association, and rising default rates as borrowers fail to repay are creating more options for buyers of distressed assets.
On the stock trading front, US stocks close near record highs. According to trading, US stocks pared some of their gains to close near record highs on Friday, supported by rising expectations for a September interest rate cut amid signs of easing inflation as earnings season begins with banks in focus.
The S&P 500 rose 0.5%, after hitting an all-time high of 5,655 during the session. Also, the Nasdaq 100 rose 0.5%, rebounding from its worst day since April. Furthermore, the Dow Jones jumped 247 points, closing above the 40,000 marks for the second time, having last reached that level on May 17. Moreover, JPMorgan shares fell 1.2% despite higher-than-expected revenue driven by higher investment banking fees. Likewise, Citigroup fell 1.8% even after beating revenue and earnings expectations. Ultimately, Wells Fargo shares fell 6% after reporting lower-than-expected net interest income.
During last week’s trading, the Dow led gains, jumping 1%, followed by the S&P 500 (+0.6%) while the Nasdaq 100 fell (-0.5%).
USD/JPY Technical analysis and Expectations Today
The USD/JPY pair continues to trade slightly below its 100-hour moving average. A late pullback on Friday pushed the pair closer to the oversold levels of the 14-hour RSI. In the near term, based on the hourly chart, the USD/JPY pair is trading within a sideways channel. However, the 14-hour RSI has recently declined to approach oversold conditions. Therefore, the bears will target extended pullbacks around 156.96 or lower at the 156.14 support. On the other hand, the bulls will look to pounce on the bounces around 158.55 or higher at the 159.33 resistance.
In the long term, based on the daily chart, the USD/JPY pair is trading within an ascending channel. However, the 14-day RSI has recently retreated to recover from overbought levels. Therefore, bears will target extended pullback profits around 154.50 or lower at 150.82 support. On the other hand, bulls will look to pounce on profits around 161.90 or higher at 165.35 resistance.
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