The US Federal Reserve’s last meeting minutes and US job numbers announcement are the most important events for the Forex currency market in general and for the US dollar in particular this week. The US dollar continues to achieve record gains against the rest of the other major currencies, and in the case of the USD/JPY currency pair, it moved towards its highest in 24 years. The currency pair is stabilizing around the 135.20 level at the time of writing the analysis, after gains towards the 137.00 resistance level.

The clear contrast between the future of global central bank policy tightening and economic performance between the US and Japan remains in favor of the overall bullish trend for the currency pair. The US Federal Reserve continues to confirm that it is determined to raise the US interest rate more times until the record inflation in the country is contained, and at the same time, the economic performance of the United States provides it with enough impetus to pass it.

On the other hand, the Japanese central bank is completely unlikely to follow in the same footsteps as global central banks, and is still providing more stimulus to the Japanese economy, which is suffering from the consequences of the epidemic and finally the Russian-Ukrainian war. And according to what was recently announced, Japan’s tax income for the year ending in March rose to a record high for the second year in a row, as corporate profits and incomes jumped amid the ongoing recovery from the epidemic.

Tax income for the most recent fiscal year was 67 trillion yen ($492 billion), according to a statement issued by Japan’s Ministry of Finance. With an unexpected big jump in sales and corporate tax revenue, total revenue increased about 10% from last year’s record high of 60.8 trillion yen. The positive numbers suggest that Japan’s recovery may be stronger than expected, and that less debt issuance may be required if tax revenue levels continue. However, the fee gains are not enough to reduce Japan’s debt mountain and the country will need to continue issuing government bonds to ensure that the social security system continues to be funded.

Sales tax income for the year ending in March was 21.9 trillion yen, up 900 billion yen from the previous year and hitting a record high. The ministry’s data showed that corporate tax increased to 13.6 trillion yen, while income tax rose to 21.4 trillion yen. For the year starting in April of this year, the government expects total revenue to be 65.2 trillion yen, but that figure may be revised upward if the trend continues last year.

The Finance Ministry also said that as a result of higher tax income levels, the government will issue 8 trillion yen less new government bonds.

I have often mentioned that after the recent and continuous record gains for the USD/JPY currency pair, this may be punctuated by the occurrence of profit-taking sell-offs, and then the currency pair will complete its natural course to the upside. As the technical indicators are still moving towards overbought levels, the markets have fully absorbed the factors of the US dollar’s gains. The closest targets for the bulls are currently 136.00, 136.85 and 138.00, respectively. On the other hand, according to the performance on the daily chart, the actual reversal of the general trend to the downside will not occur without breaching the 130.00 psychological support level. Otherwise, the general trend will remain bullish.

I think at best we are probably looking at a “fade the rallies” situation.

The S&P 500 rallied on Wednesday to reach the 4000 level. However, we pulled back just a bit from this large, round, psychologically significant figure, as we continue to see a lot of volatility. Whether or not we can hang on to the gains is a completely different question, but at this point, I think we have a scenario where the markets will continue to show a lot of volatility. I believe at this point, it’s worth noting that we are trying to bounce from the bottom of the Bollinger Band indicator as well.

I do believe that any rally at this point is probably short-term in nature, so I’m looking for some sign of exhaustion to start selling. The 4100 level would be the next area of resistance, followed by the 4200 level. Underneath, I believe that the 3800 level could offer a bit of support and breaking down through that level will cause the stock market to take an absolute crashing dump.

Interest rates are starting to drop a little bit in the 10-year yields, so that does give bullish traders at least a little bit of hope, but ultimately, I think this is a scenario where you will continue to see plenty of problems plaguing the market, and plenty of fear to say the least. It’s not necessarily a market that I’m willing to get long of yet but breaking above the 4100 level is at least an attempt to change the overall trend, so it’s possible that we have the beginning of something a bit bigger. That being said, there are still a lot of concerns about inflation sticking around, and growth slowing. If that is going to be the case, there’s no real reason to think that stocks will climb over the longer term.

As Wall Street thrives on cheap money, they are essentially going to be waiting for the Federal Reserve to step in and save them. We are bouncing a bit from a 20% drop, which is typical as a lot of traders look at that as a great entry point for investments. That being said, markets can get a lot cheaper given enough time, so you need to be very cautious. I think at best we are probably looking at a “fade the rallies” situation.

I will be watching this market quite closely at this point and could be setting up for a huge swing trade.

The Australian dollar fell a bit on Wednesday as we see a continuation of the shock to the markets after the FOMC statement suggested that the Federal Reserve is going to be much more hawkish than initially expected. Because of this, the US dollar strengthened, and it looks as if the Australian dollar is taking it on the chin. The market is trying to break through the 0.75 handle, and if it breaks through the 0.7450 level, it will have completely wiped out all of the potential reactions to the RBA statement.

The Australian dollar has been ripping higher for quite some time, so it will be interesting to see whether or not reactions continue to follow commodity markets higher, but it is worth noting that commodity markets have been hit as well. Ultimately, this is a market that I think will continue to see a lot of trouble ahead, and now we have the 0.75 level offering even more in the way of potential trouble, as we now will have to figure out whether or not we are going to hold the uptrend intact, or if we are going to turn things around.

There are a lot of concerns when it comes to the overall global economy, and that is one thing that you should keep in the back of your mind when you are looking at the Aussie dollar. If global growth suddenly stops, that would be extraordinarily negative for most assets with perhaps the exception of the US dollar. With that, I think that it is probably only a matter of time before we have to make some type of a longer-term decision, so the next couple of days are going to be crucial. At this juncture, if we were to break down below the 0.7450 level, that could open up a massive wave of selling. I will be watching this market quite closely at this point and could be setting up for a huge swing trade. Ultimately, if we turn around and clear the 0.7550 level to the upside, then it is possible that we could continue the overall uptrend. I suspect that the Thursday and the Friday sessions both are going to be very important. The next couple of days could determine the longer-term trend for this market.