USD/JPY Technical Analysis: Exposure to Selling Operations

During yesterday’s trading, the price of the USD/JPY currency pair was exposed to selling operations, pushing it towards the support level of 145.66. This was after testing the resistance level of 147.37 in the same session, the highest for the currency pair for nine months. Before the performance, we recommended to our esteemed clients to sell the currency pair from the resistance level of 147.30.

The income level was strong and after that the currency pair went in the recommended target with a good profit. The sales came in the first place amid the negative impact of the US dollar on the announcement of a decline in American consumer confidence less than expected, along with the announcement of a decline in American job opportunities.

Americans feel less financial confidence as summer draws to a close and prices and interest rates rise and they are ready to spend. There were also signs on Tuesday of a slowdown in the highly resilient US jobs market. In this regard, the Conference Board Business Research Group said that its index of American consumer confidence fell to 106.1 in August from 114 in July. The analysts were expecting a reading of 116.

The decline in August – which somewhat mirrored the decline of the stock market this month – wiped out the gains made in June and July. The index measures Americans’ assessment of the current economic situation and their expectations for the next six months. Both measures saw big declines in August.

Consumers’ view of current conditions fell to 144.8 from 153, and the index of future expectations fell to 80.2 from 88 in July. Readings below 80 for future expectations historically indicate recession within a year. Consumer spending represents about 70% of economic activity in the United States, so economists and investors pay close attention to their mood to measure its impact on the economy in general.

Confidence appeared to rebound in the late spring as inflation eased in the face of رفع interest rates 11 times by the Federal Reserve. But the contraction seen this month reflects consumer anxiety about spending on unnecessary goods, especially if they have to put it on a high-interest credit card.

The US economy – the largest in the world – has proven surprisingly resilient in the face of sharply rising borrowing costs. Employers are adding 278,000 jobs per month so far this year; and at 3.5% in July, the unemployment rate is not far from its lowest level in half a century.

The decline in inflation and strong employment has led to increased hopes that the Federal Reserve may implement a so-called soft landing – slowing the economy enough to tame inflation without pushing the United States into recession. But the latest data suggests that Americans may be tightening their budgets as the school year begins, and with the all-important holiday season just a few months away.

• Despite yesterday’s operations, the general trend of the USD/JPY currency pair is still rising.
• There will be no first break in the trend without the currency pair moving towards and below the support level of 142.00 and from there to the psychological level of 140.00 and so on.
• The US dollar is supported by expectations of an increase in the American interest rate and there will be no reversal of its gains this week without readings weaker than expected for US jobs numbers.

On the other hand, if the readings of the American jobs report come in stronger and support the path of tightening the Federal Reserve Bank’s policy, the dollar/yen currency pair may return to the resistance levels of 146.55 and 147.85 respectively.

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