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USD/JPY Technical Analysis: Fate of US Debt

This week, the fate of the US dollar will be between inflation numbers, which determine the fate of the US Federal Reserve’s policy. Before these important and influential events, the price of the USD/JPY currency pair settled in narrow ranges in the recent trading sessions, between the level of 134.64 and the level of 135.36 and settled around the level of 135.20 at the time of writing the analysis.


US President Joe Biden and Congressional President Kevin McCarthy met with other congressional leaders on Tuesday, hours after both made clear they were not interested in extending the short-term debt limit. Neither side has shown any sign of compromise as the threat of a first-ever US default looms weeks later and markets show early signs of nervousness.

“We’re going to start and solve all the world’s problems,” Biden said quipped before the meeting, which marked the first time he and McCarthy met to discuss the nation’s borrowing limit since Feb. 1.

If the meeting makes little or no progress, market anxiety is likely to increase before June 1 – the date when US Treasury Secretary Janet Yellen warned the nation could exhaust its ability to meet all repayment obligations without taking action. A short-term extension or increase in the debt limit would be the most appropriate way to delay the crisis, but both sides took that off the table before the meeting. “Why do you keep kicking the can down the road?” McCarthy told reporters Tuesday at the Capitol, when asked about extending the cap through Sept. 30.

For her part, the White House press secretary, Karen Jean-Pierre, similarly said that the short-term extension is not Biden’s “plan”, but rather a search for the speaker, who demanded significant cuts in domestic spending in exchange for Republican votes to raise the borrowing limit in the country.

The four-week Treasury yields reached record highs last week as the possibility of any default in early June increases. But so far the stock markets have not recorded a significant decline attributed to the crisis.

This marks a differenc from the 2011 debt crisis, in which the S&P 500 fell more than 16% in the five weeks prior to the Aug. 2 cap increase. S&P finally downgraded the United States’ credit rating on August 5. For its part, the Republican-led House of Representatives last month passed a bill that would raise the debt ceiling by $1.5 trillion in exchange for budget deficit cuts of $4.8 trillion over 10 years. And it contains a host of conservative priorities, including eliminating green energy subsidies and taxation spending from Biden’s signature legislation enacted last year.

The White House said it would only accept a “clean” debt ceiling increase without strings attached, though Biden is open to separate talks about budget levels for fiscal year 2024. Just before the meeting, Senate Republican Leader Mitch McConnell said Biden should negotiate a deal with McCarthy on spending and debt.

“Either he pushes the country into default or he comes to the negotiating table,” he said of the president.

  • There is a clear break of the recent bullish channel for the USD/JPY currency pair.
  • The bears will gain more control over the trend if the currency pair moves towards the support level of 133.30 and below it.
  • The bulls will not control the trend again without moving towards the resistance level of 137.20 again.

The currency pair may continue to move in narrow ranges until a strong reaction to US inflation numbers and any hints of Fed monetary policy officials.

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