For the second day in a row, the price of the USD/JPY currency pair is trying to recover higher with gains to the resistance level of 133.90 today. This is after strong selling recently that pushed it towards the 130.40 support level, the lowest in two months. We recently witnessed an uprising of the Japanese yen against the other major currencies. The US dollar has fallen since the recent policy update of the US Federal Reserve, in addition to the announcement that the US economy has entered a recession.

Dollar Economic Data

US employers recorded fewer job openings in June as the US economy faces severe inflation and rising interest rates. US job vacancies fell to 10.7 million in June from 11.3 million in May, the Labor Department said. Jobs, which did not exceed 8 million in the previous month last year, exceeded 11 million per month from December through May before declining in June.

The number of Americans who left their jobs fell slightly but remained high at 4.2 million in June, while layoffs fell to 1.3 million from 1.4 million in May, the Labor Department said in its monthly survey on job opportunities and employment turnover.

The US labor market has been resilient so far this year, and companies have complained of difficulty filling vacancies: employers added an average of 457,000 jobs per month in 2022; US unemployment is near its lowest level in 50 years. This is one reason why many economists believe that the US economy has not yet gone into a recession even though GDP, the broadest measure of economic output, has shrunk for two consecutive quarters – a baseline for the onset of the downturn.

The Labor Department’s July jobs report, released on Friday, is expected to show employers processed another 250,000 jobs last month, a number that would be fine in normal times but the lowest since December 2020, when the global economy was devastated. from the epidemic. Economists also expect US unemployment to remain at 3.6% for the fifth consecutive month, according to a survey by data company FactSet.

The US economy is under pressure as the Federal Reserve raises interest rates to combat inflation, which is running at the fastest pace in four decades.

Forecast of the US dollar against the yen:

On the daily chart below, USD/JPY is trying to return to the vicinity of the general bullish trend and that may happen if the bulls move in the currency pair towards the resistance levels 134.60 and 136.00 respectively. On the other hand, and as I mentioned in the recent technical analyses, it will be important to break the psychological support level of 130.00 to turn the general trend into a bearish one. The US dollar will be affected today by the announcement of the ISM Services Purchasing Managers’ Index reading.

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The general trend of the USD/JPY currency pair is still bullish, 

In the same vicinity of the closing of last week’s trading, the price of the USD/JPY currency pair settled at the beginning of this week’s trading, stable around the 124.50 resistance level, the highest for the currency pair in six years. The US dollar is still enjoying strong momentum from expectations of raising US interest rates and improving performance, on the other hand, the Japanese yen, is being disappointed by the continued support for the Japanese economy to recover from the effects of the epidemic, as well as the repercussions of the Russian-Ukrainian war recently.

The gains of the US dollar against the rest of the other major currencies are important this week with the announcement of US inflation figures and retail sales figures. March may prove to be the highest for US inflation, but price pressures are likely to remain both high and persistent on the back of firmer demand for services and geopolitical risks.

With the annual inflation rate well above the Fed’s 2% target, officials have focused heavily on policy. They are expected to raise US interest rates by half a point in May and begin reducing assets on the central bank’s balance sheet. The Fed last month began what is expected to be a series of interest rate increases to tame inflation, but efforts to cool demand will take time to materialize. While some price pressures that have been particularly hot during the pandemic, such as those for used cars, are beginning to decline, others such as rents threaten to continue to rise.

US consumer prices likely rose 8.4% last month from a year ago, according to a Bloomberg survey of economists ahead of data due Tuesday. This would be the fastest annual rate of US inflation since early 1982, and reflects rising energy costs in the wake of the Russian invasion of Ukraine. The projected monthly gain of 1.2% would be the largest increase since 2005.

Economists expect the inflation rate for the world’s largest economy to stabilize at an average of 5.7% in the fourth quarter. However, this is about three times the annual rate seen in the years leading up to the pandemic. Such forecasts include assumptions that stress in supply chains will begin to subside and that the worst of commodity inflation is coming to an end as Americans shift more of their spending to services. Much of the faster inflation last year was driven by higher prices for goods such as cars and home furnishings, but these expensive items are often one-off purchases.

The Covid lockdown in China is a complicating factor, stressing already fragile supply chains and disrupting ports around the world. In this regard, Fed Governor Lyle Brainard said in a recent speech that she is watching whether service inflation accelerates as consumer demand for goods shifts. Within the CPI, the component that economists care about most is shelter rent, which makes up nearly a third of the overall index. In February, such costs recorded the largest monthly increase since 2005. This may affect how serious the Fed is to tighten monetary policy.

According to the technical analysis of the pair: So far, the general trend of the USD/JPY currency pair is still bullish, and investors do not care about the arrival of technical indicators towards overbought levels after the recent strong gains, where the discrepancy in economic performance and the future of monetary policy is still in favor of the US dollar. With the momentum halting, the currency pair may be subjected to a strong profit taking sale, and in general, there will be no change in direction without the currency pair moving below 120.00 – the previous psychological top.

The continuation of the factors for the dollar-yen pair’s gains does not rule out moving with it above the resistance 125.20 and 126.00 again.

Gold futures cut a series of losses that lasted three sessions and rose to the highest level. It reached the resistance level of 1938 dollars an ounce, before the price of gold settled around the level of 1923 dollars an ounce. According to reports, Russia attacked certain areas of Ukraine that were part of the Moscow undertaking. Doubts about Russia’s pledge made the mood in stock markets a bit bearish and prompted investors to look for safer assets like gold. In addition, the weakness of the US dollar contributed significantly to the sharp rise in the price of gold.

Moscow has vowed to halt military operations around Kyiv and Chernihiv in an attempt to stop the escalation of the war. Ukraine responded with skepticism to the promise, while the United States warned that the threat was far from over. US President Joe Biden asked if the Russian announcement was a sign of progress in the talks or an attempt by Moscow to buy time to continue its offensive.

Moscow’s chief negotiator, Vladimir Medinsky, said there was still “a long way to go” to reach a joint agreement with Ukraine.

A report issued by the ADP Payroll Processor showed that private sector employment in the US jumped by 455,000 jobs in March after rising by 486,000 jobs, revised upwards in February. Economists had expected US private sector employment to rise by 450,000 jobs, compared to an addition of 475,000 jobs originally reported for the previous month.

Data from the Commerce Department showed that the U.S. economy grew slightly less than expected in the fourth quarter of 2021. The Commerce Department said real GDP rose 6.9% in the fourth quarter, reflecting a modest downward revision from a previously estimated rise of 6.9%. 7%. Economists had expected GDP growth not to be adjusted.

Slightly slower than previously estimated GDP growth primarily reflected downward revisions in consumer spending and exports, partially offset by an upward adjustment to private inventory investment.

According to the technical analysis of gold: Global geopolitical tensions exist, and recently, the Corona outbreak re-emerged which affected after a period of rest for the markets to worry about it. I still prefer buying gold from every bearish level and the most appropriate levels to buy gold are 1880 and 1858 dollars, respectively. On the other hand, and as mentioned before, stability will remain above the resistance of 1900 dollars, motivating the bulls to dominate and increase technical buying deals. The closest targets for bulls are currently 1942, 1960 and 1975 dollars, respectively. The last level is important to move towards the psychological top of 2000 dollars.

The price of gold will be affected today by the price of the US dollar and the extent to which investors are willing to risk or not, as well as the reaction from the announcement of US economic data. In addition, most notably the jobless claims and the personal consumption expenditures price index reading, the Federal Reserve’s preferred measure for measuring US inflation.