USD/JPY Technical Analysis: Bulls Control Gets Stronger

The Fed seeks to cool hiring because if companies are less desperate to add workers, and fewer people quit to look for higher-paying jobs elsewhere, companies will be under less pressure to raise wages to find and retain workers.

• As I mentioned many times before, the discrepancy between the aggressive policy of the US Central Bank and the Bank of Japan, which has negative interest rates, will remain supportive of the upward trend of the USD/JPY currency pair.
• The gains of these factors reached the currency pair towards the resistance level of 143.55, before it settled around the level of 142.80.
• At the time of writing the analysis, the currency pair may remain in this path until the markets and investors react to the announcement of the US job numbers by the end of the week.

Before that, US employers posted fewer jobs in June, a sign that the frantic demand for workers that was a key feature of the post-pandemic economy is cooling down a bit. In this regard, the US Department of Labor said job vacancies fell to 9.6 million in June, down slightly from the previous month but far below the 10.3 million in April and the lowest in more than two years. The government report also showed that the number of people who left their jobs in June fell sharply to 3.8 million, from 4.1 million, in another sign of a slowdown in the US labor market.

The Fed seeks to cool hiring because if companies are less desperate to add workers, and fewer people quit to look for higher-paying jobs elsewhere, companies will be under less pressure to raise wages to find and retain workers. Small increases in wages can help reduce inflation, as companies will not have to raise their prices to offset higher labor costs.

Yesterday’s report indicates that there are 1.6 jobs for every unemployed worker, down from a peak of 1.9 earlier this year. But this is still much higher than it was before the pandemic. Since the economy first emerged from the pandemic, jobs have soared — reaching a record high of 12 million in March 2022. Before the pandemic, it had never been above 7.6 million.

All in all, yesterday’s report, known as the Job Opportunities and Employment Turnover Surveys, or JOLTs, continues to paint a picture of a healthy economy, as employers seek to hire more people. And the number of self-employed workers remains slightly above pre-pandemic levels, indicating that many Americans are continuing to find better-paying opportunities in new jobs.

On Friday, the government is preparing to release the US jobs report for July, which will show how many jobs were added in July and whether the unemployment rate has fallen below its current level of 3.6%, which is close to the lowest level in half a century. Economists expect the report to show a gain of 200,000 jobs, with the country’s unemployment rate unchanged, according to a survey by data provider FactSet.

For its part, the Fed last week raised its key short-term interest rate for the 11th time in 17 months as part of its continued efforts to curb inflation, which is currently at 3%. Excluding the volatile food and energy categories, according to the Fed’s preferred measure, it was up 4.1% year-over-year. Most economists would have expected such a sharp increase in interest rates to lead to widespread layoffs and higher unemployment. Instead, the unemployment rate has barely changed since the Fed started raising borrowing costs last year.

There is no change in my technical view of the performance of the USD/JPY currency pair, as the general trend is still bullish, and stability is above the psychological resistance of 140.00, which still supports the bulls’ control. The way will be paved for a return to the resistance 145.00, if the US job numbers come out this week, supporting further tightening of the US Federal Reserve’s policy. On the other hand, and for the same period of time, to exit the bullish trend, the currency pair must move toward the support level of 138.85 again.

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