- At the end of last week's trading, the USD/JPY was subjected to selling, starting from the resistance level of 156.75, the highest for the currency pair in three months, with losses extending to the level of 153.86.
- Obviously, this came amid profit-taking before trading closed stable around the level of 154.30.
- Concurrently, the overall trend of the USD/JPY pair remains bullish and may remain so for some time.
US Dollar Stable Around Two-Year High
According to reliable trading platforms, the price of the US dollar index DXY, which measures the performance of the US currency against a basket of other major currencies, is stable around its highest in two years, and according to recent trading, the index has recorded seven consecutive weeks of gains. The US dollar's gains came primarily in light of the strong US economic performance and hints from US Federal Reserve officials led by Jerome Powell that the bank will not accelerate the pace of reducing US interest rates as long as the economy is strong, especially compared to other global economies that are suffering. Recently, market expectations for a 25-basis point cut in US interest rates in December fell to 62%, down from 86% previously.
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Strong US Economic Data
According to economic data, we have observed positive results for US economic sectors that confirm the view of the US Federal Reserve. Most notably, US retail sales exceeded expectations, indicating continued resilience in the consumer sector. Prior to that, the main and core US producer prices were announced as expected, but annual growth rates exceeded expectations, in contrast to the US consumer price index data, which met expectations.
In terms of the performance of US stock indices, over the past week, the S&P 500 lost 2.2%, the Dow Jones fell 2.3%, and the Nasdaq declined 2.9%, reflecting a reversal of the upward trend that followed the US presidential election and was driven by optimism surrounding President Trump's policies.
USD/JPY Technical Analysis and Expectations Today:
Recently, the gap between expectations regarding the future of US and Japanese central bank policies has widened, which will be in favour of further strengthening the upward trend of the USD/JPY currency pair. Therefore expect to buy the currency pair back from every downward level, and currently, the closest support levels for the USD/JPY are 153.70, 152.20, and 150.00, respectively. Conversely, and according to the performance on the daily chart above, the psychological resistance of 160.00 will remain an important target for the upward trend and for the markets. Consequently, it will then increase talk of imminent Japanese intervention in the forex markets to prevent further decline in the yen. However, this time, there is Trump, who has often talked about countries that devalue their currencies.
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