USD/JPY Technical Analysis: Current Trend Objectives
Investors are weighing economic performance and the future of central bank monetary policy tightening which is still in favor of greater strength in the price of the US dollar against the Japanese yen currency pair USD/JPY. The currency pair started trading this week to hit the 123.00 resistance level as performance was at the end of last week’s trade. The US jobs report supported expectations of higher US interest rates, which supported the US dollar.
According to official figures, the United States of America added nearly half a million jobs in March and the country’s unemployment rate fell more than expected, highlighting a strong labor market that should support significant Fed tightening in the coming months. Friday’s Labor Department report showed U.S. nonfarm payrolls rose 431,000 last month after an upward revision of 750,000 in February. The country’s unemployment rate fell to 3.6%, near its lowest level before the pandemic, and the labor force participation rate soared.
A total of 490,000 jobs were expected to be added and the unemployment rate to fall to 3.7%. As a result, short-term Treasury yields rose and the US dollar strengthened after expectations were released that the data would support the Fed’s hawkish policy.
The data suggests that the recovery in the US labor market is continuing apace, with employers doing better to fill near record numbers of jobs. Inflation, shrinking excess household savings and robust wage growth are factors that could attract more Americans to work in the months ahead. COVID has also become a lesser factor as countries have largely lifted restrictions.
For their part, Fed officials including Chairman Jerome Powell have said in recent weeks that they would support more aggressive monetary policy to contain decades-old high inflation, including a possible 50 basis point hike. at the next political meeting in May. Central bankers have repeatedly cited the strength of the labor market as one of the reasons the US economy has been able to manage a series of interest rate hikes that are expected to extend into next year.
Friday’s report showed average hourly wages were up 0.4% from February and 5.6% from a year ago, the most since May 2020. However, inflation – at its highest level since the early 1980s – outpaces wage growth and effectively manages pay. It shrunk to many Americans and began to weaken consumer demand. Despite the strength of the job market, US President Joe Biden’s acceptance rating by Americans has been affected by rising inflation. Biden announced on Thursday that the United States will release 1 million barrels of oil a day from reserves for six months to help mitigate rising gasoline prices.
According to the technical analysis of the pair: On the daily chart, the price of the USD/JPY currency pair is still moving in bullish momentum, waiting for something new. Current stability around the 123.00 resistance level will support the bulls’ dominance for more directional strength, and therefore move towards stronger ascending levels, the closest of which are currently 123.60, 124.20 and 125.00 , respectively. Despite this, the currency pair may be exposed to take profit trades as these levels are sufficient to push the technical indicators towards overbought levels, which we support selling from each bullish level.
On the other hand, and over the same period, it will be important to break the support levels of 120.00 and 118.50 to abandon the current bullish outlook.