- For four consecutive trading sessions, the US dollar against the Japanese yen USD/JPY is trying to rebound higher, but its gains did not exceed the 146.25 level.
- It is stable around it at the beginning of trading this important week, which will determine the fate of the US interest rate decision for September, as US jobs figures will be announced after markets reacted to the announcement of US inflation rates in the past days.
According to the results of the economic calendar, according to the latest report issued by the Department of Commerce, the US economy grew at an annual rate of 3% in the second quarter of 2024. This represents a significant acceleration from the 1.4% growth rate recorded in the first quarter, driven largely by strong consumer spending and business investment. Consumer spending, which accounts for about 70% of US economic activity, rose at an annual rate of 2.9%, up from the initial estimate of 2.3%. Business investment also showed strong performance, expanding at a rate of 7.5%, with equipment investment rising by 10.8%.
Furthermore, the figures highlight an economy that remains resilient despite rising interest rates and inflation concerns. The revised GDP growth figures point to continued strength in consumer spending and business investment. Consumers, helped by a slight increase in confidence, maintained their spending, which rose at a 2.9% annual rate in the second quarter. Business investment also contributed to the growth, particularly in equipment, which increased by 10.8%.
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Moreover, the level of investment reflects business confidence in future demand, despite economic uncertainty caused by higher borrowing costs and volatility in global markets.
Overall, the inflation picture is gradually improving, with the personal consumption expenditures index, the Fed’s preferred measure, rising at a 2.5% annual rate in the second quarter, down from 3.4% in the first quarter. Core inflation in personal consumption expenditures, which excludes food and energy prices, slowed to 2.7% from 3.2% in the first quarter. The Fed has been targeting a 2% inflation rate, and these figures suggest progress toward that goal, providing a potential window for future US interest rate cuts.
The Fed is now positioning itself to consider cutting US interest rates as inflation approaches its target. With inflation falling from a peak of 9.1% to 2.9% and likely to fall further, the Fed is aiming for a “soft landing” – lowering inflation while maintaining employment levels and avoiding a recession.
Rates have been raised 11 times since 2022, reaching a 23-year high, but a policy shift could be imminent. Market watchers are anticipating the Fed’s next meeting in mid-September, when further rate cuts could be discussed, which could ease borrowing costs for consumers and businesses. Overall, recent GDP growth data underscores the resilience of the US economy. While higher interest rates were expected to slow, the economy continues to grow, supported by steady employment numbers and consumer spending. There are signs of slowing momentum in the labor market, with the unemployment rate rising to 4.3% over the past four months and job openings declining. Despite these headwinds, the overall economic outlook remains cautiously optimistic.
USD/JPY Technical analysis and Expectations Today
Based on the daily chart below, USD/JPY remains in its broader bearish trend and a breakout could occur if it moves towards the 147.80 and 149.20 resistance levels and the 150.00 psychological resistance levels respectively. Conversely, and in the same time frame, a return to the 144.30 support area would be important for bears to prepare for a strong downside breakout. I expect the currency pair to trade in tight ranges today amid the US holiday.
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