- The neutral situation dominates the performance of the USD/JPY currency pair in the recent trading sessions, and the psychological resistance 140.00 still supports the bulls’ control.
- A quiet trading week for the forex market in general, and so far, the US dollar is still supported by expectations of a US interest rate hike, especially after the recent strong US jobs numbers.
- The price of the USD/JPY pair is stable around the level of 139.25 at the time of writing the analysis.
US service sector activity grew only modestly in May, according to a report from the Institute for Supply Management (ISM), with the sector’s activity index falling more than expected. ISM said its Services Purchasing Managers’ Index fell to 50.3 in May from a reading of 51.9 in April, although a reading above 50 still indicates growth in the sector. Economists had expected the index to fall to 51.5.
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The larger-than-expected decline in the headline index was partly due to the slower pace of growth in new orders, as the new orders index fell to 52.9 in May from a reading of 56.1 in April. The employment index also fell to 49.2 in May from a reading of 50.8 in April, indicating a decline in service sector jobs after three consecutive months of growth. The report also showed the business activity index fell to 51.5 in May from 52.0 in the previous month. Commenting on the findings, Anthony Neves, Chair of the ISM Services Business Survey said: “There has been a slowdown in the growth rate of the services sector.” “This is mostly due to declines in hiring and continued improvements in delivery times (which has led to a decline in the supplier delivery index).” capacity, which in many ways is a product of stagnant demand.”
On the inflation front, the price index fell to 56.2 in May from 59.6 in April, indicating a slowdown in the pace of price growth. ISM released a separate report last Thursday showing US manufacturing activity contracted at a slightly faster rate in May. ISM said its manufacturing PMI fell to 46.9 in May from 47.1 in April, and any reading below the 50 level indicates contraction. Economists had expected the index to fall to 47.0.
There is no change in my technical view of the performance of the USD/JPY currency pair, as the bulls will remain in control. This is as long as the currency pair is stable around and above the psychological resistance 140.00. The ascending path that extended to the resistance level 140.92 stopped, came as a result of Japanese hints of intervention in the forex market to prevent a further collapse of the Japanese yen price. At the same time the foundations of the dollar’s strength are still in effect, ensuring that the bulls remain in control for a longer period.
On the other hand, according to the performance on the daily chart, the movement of the dollar / yen currency pair towards the support levels 138.40 and 137.00 threatens the current bullish outlook for the currency pair. During today’s trading, and in the absence of influential US economic releases, the currency pair may interact with whether or not investors take risks, in addition to the signals of monetary policy officials for both the Japanese Central Bank and the US Federal Reserve.
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