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USD/JPY Technical Analysis: Weak Economic Numbers

Since the start of trading this week the price of the currency pair USD/JPY has been subject to selling operations, pushing it towards the level of 145.55. It rebounded from the resistance level of 147.37, the highest it has been in nine months. It then settled around the resistance level of 145.90 before the announcement of the rest of the important American economic releases. This was led by the announcement of the US Federal Reserve’s preferred inflation rate and the number of weekly US jobless claims.

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According to the official announcement, the American economy grew at an annual rate of 2.1% in the period from April to June, which shows continued flexibility in the face of rising borrowing costs for consumers and companies. The US government had previously estimated that the economy grew at an annual rate of 2.4% in the last quarter. Overall, the Commerce Department’s second estimate for growth in the last quarter saw a slight acceleration from an annual growth rate of 2% in the period from January to March. And although the economy slowed down due to the Federal Reserve Bank’s painstaking campaign to tame inflation by raising American interest rates, it managed to continue growing, with employers continuing to hire and consumers continuing to spend.

A report Wednesday on the country’s gross domestic product — the total output of goods and services — showed that growth in the last quarter was driven by increases in consumer spending, business investment and spending by state and local governments. The report’s consumer price gauge also showed inflation slowing, which could ease pressure on the Federal Reserve to raise interest rates further.

According to the advertiser, consumer spending, which represents about 70% of the American economy, rose at an annual rate of 1.7% in the quarter from April to June – which is a good increase, despite its decrease from 4.2% in the first three months of 2023. It rose at an annual rate Strong by 6.1% in the last quarter. Investment in housing decreased, which was affected by the rise in mortgage interest rates in the second quarter.

The American economy – the largest in the world – has proven surprisingly resilient in the midst of the aggressive campaign launched by the Federal Reserve Bank to eliminate the resurgence of inflation, which last year reached its highest level in four decades. Since March of last year, the Federal Reserve has raised US interest rates 11 times, making borrowing for everything from cars to homes to business expansions much more expensive, leading to widespread expectations of a recession ahead.

Since peaking at 9.1% in June 2022, US annual inflation has declined fairly steadily. Last month, the inflation rate was 3.2%, a significant improvement although still above the Fed’s 2% inflation target. Excluding volatile food and energy costs, so-called core inflation in July equated to the lowest monthly rise in nearly two years.

One of the price gauges in the GDP report – the personal consumption expenditure index – rose at an annual rate of 2.5% in the last quarter, down from a 4.1% pace in the January-March quarter and the smallest increase since the end of 2020. And since the Federal Reserve began raising interest rates , the economy has been boosted by the ongoing healthy labor market. Employers added a strong average of 258,000 jobs per month this year, although that average slowed over the past three months to 218,000 jobs.

A government report on Tuesday added evidence that the labor market is gradually weakening: It showed that employers announced far fewer job openings in July and that the number of people who quit their jobs fell for the second month in a row. (When fewer people leave their jobs, it usually indicates that they are not confident of finding a new job).

However, American job opportunities are still much higher than pre-pandemic levels. The country’s unemployment rate, which stands at 3.5%, is still barely higher than its lowest level in half a decade. When the government releases the U.S. jobs report for August on Friday, economists polled by data firm FactSet believe it will show that despite the slowdown in hiring, employers added 170,000 jobs. The combination of falling inflation, continued economic growth and slower but steady employment has led to increased hopes for a rare “soft landing”. This is the scenario in which the Fed manages to overcome high inflation without causing a painful recession.

  • The recent sales did not reach the stage of breaking the general trend of the USD/JPY currency pair, which is still rising.
  • The trend will remain upward until Japanese intervention in the markets to prevent further collapse of the price of the Japanese yen.
  • The difference between the strict American Federal Reserve Bank policy and the Bank of Japan’s accommodative policy with negative interest rates will remain an important factor for the continuation of the bulls’ control of the trend.

The closest resistance levels for the currency pair are currently 146.60 and 148.00 respectively. On the other hand, and according to the trend on today’s chart, there will be no first break in the trend without movement of the dollar currency pair against the Japanese yen USD/JPY below the support level of 142.00.

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