- Despite the weakness of the Japanese yen against the rest of the other major currencies, the pair of the US dollar against the Japanese yen USD/JPY was exposed to selling operations for two days in a row.
- It rebounded down from the resistance of 131.11 to the level of 129.30 and settled around the level of 129.60 at the time of writing the analysis.
- The US Dollar is under pressure in the markets until the announcement of the results of the important and influential American economic data today and tomorrow.
- These results will have a strong and direct reaction on the future policy expectations of the American Federal Reserve Bank.
We have observed strong and sharp swings for US stock indices on Wall Street as the markets operate through a competing pair of big ideas. On the one hand, there are growing concerns about the weakening of profits and the bending of the economy under the weight of interest rate increases by the Federal Reserve Bank. On the other hand, there are hopes that the US economy will be able to avoid a severe recession and that the slowdown in inflation will lead the Federal Reserve to handle prices easily.
Fears are growing that corporate profits are set to shrink on a large scale due to the slowing economy and rising interest rates and inflation, which is still high. Analysts therefore expect S&P 500 companies to report their first decline in quarterly profits in the next two weeks since 2020, when the pandemic was crushing the economy. There may be more cuts in estimates on the way to the first half of 2023.
Almost everyone expects the Fed to raise its key overnight interest rate by 0.25 percentage points on February 1. That would be another downward shift in the size of Fed rate hikes, down from 0.50 basis points last month and four consecutive 0.75 basis point increases earlier. The slowdown in inflation since the peak of the summer has raised hopes that the Federal Reserve will exert less additional pressure on the economy.
Therefore, many investors expect inflation to continue to moderate, and they are betting that the Federal Reserve Bank will start cutting interest rates at the end of this year. Meanwhile, the Federal Reserve says it wants to keep interest rates high at least until the end of the year to ensure that really high inflation is eliminated.
Expectations of the US dollar against the yen today:
According to the performance on the chart for today’s time frame, the price of the currency pair USD/JPY is still trying to rebound higher but lacks sufficient momentum and forex investors rely on the positive results of the American economic data today, led by the announcement of reading the growth rate of the country’s gross domestic product. If you come with stronger results, the bulls may find the opportunity to move towards the resistance levels 131.50, 132.30 and 133.00 respectively. The last level is important to cause a breach of the current general downward trend.
On the other hand, the general downward trend may find a wound if the bears return to the vicinity of the 128.80 and 127.90 support levels, which are sufficient to push the technical indicators towards strong sell saturation levels. I still prefer to buy USD/JPY from every bearish level.