I expect the USD/JPY currency pair to remain within its ascending channel range until the US job numbers are announced by the end of the week. 

A bullish price gap characterized the performance of the price of the USD/JPY at the beginning of this week’s trading. The currency pair moved towards the resistance level 139.00 before settling around the 138.70 level at the time of writing the analysis.

There is an opportunity to move towards the psychological resistance level of 140.00, where the strength factors of the US dollar against everyone are still strong. The US dollar gained strong impetus from the indications and confirmation of the US Federal Reserve governor that the bank is determined to increase US interest rates in a strong and continuous way. The announcement came amid weak bets that the US economy will enter a recession as many had expected before.

Powell said that the size of the Fed’s rate increase at its next meeting in late September – either half or three-quarters of a percentage point – will depend on inflation and jobs data. However, an increase in either size would exceed the traditional Fed-mandated increase by a quarter of a point, which reflects how severe inflation is. The Fed chair said that while the low inflation readings reported for July were “welcome”, adding that “the one-month improvement is much less than what (federal policy makers) will need to see before we can be confident that Inflation is moving down”.

Last Friday, the Fed’s inflation data showed that prices fell 0.1% from June to July. Although prices jumped 6.3% in July from 12 months earlier, that is down from 6.8% year-over-year in June, which was the highest since 1982. The drop largely reflected lower gas prices.

In his Friday speech, Powell noted that the history of high inflation in the 1970s, when the central bank sought to counter high inflation by raising interest rates intermittently, shows that the Fed must remain focused. He added that “the historical record strongly warns against cutting interest rates prematurely,” and that “we must continue to do so until the job is done.”

Of particular concern to Powell and other Fed officials is the potential for inflation to become entrenched, prompting consumers and businesses to change their behavior in ways that perpetuate high prices. If workers, for example, begin to demand higher wages to keep up with higher inflation, many employers will pass on higher labor costs to consumers in the form of higher prices. Many analysts are speculating that Fed officials would like to see lower monthly inflation readings for about six months, like July, before stopping the rate hike.

USD/JPY Forecast:

• I expect the USD/JPY currency pair to remain within its ascending channel range until the US job numbers are announced by the end of the week.
• Amid the continuation of the bullish momentum, I do not rule out testing the 140.00 psychological resistance, the highest for the currency pair in 25 years.
• Including and among the highest of them is the event that you can think of concluding selling deals without risk and waiting for sales to take profits, which may occur at any time.

On the downside, it broke the support 136.00, a first breach of the current ascending channel, and it is not considered a change in direction without breaking the 132.90 level. Today, the US Consumer Confidence and the number of US job vacancies will be announced.

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Markets acknowledged widespread signs that the US economy is slowing. This is despite a clear warning against assumptions that the Federal Reserve could push back on raising interest rates further or start cutting them at some point in the first months of the new year.

The trading week, in which the bulls dominated the direction of the USD/JPY pair, ended with gains, crossing the resistance level of 137.70 and closing stable around the resistance of 137.50.

This gave back to the markets the momentum for the possibility of moving towards the next psychological resistance of 140.00. The US dollar gained more momentum from the hawkishness that the Federal Reserve Bank of America representatives, led by Jerome Powell, signaled. They stated the bank is determined to raise American interest rates strongly until the American inflation, which has reached its highest level in 40 years, is contained.

Jerome Powell’s historic speech on Friday focused heavily on three key lessons for policymakers to draw from the Fed’s experience with inflation during the dark decades of the 1970s and 1980s, but he also offered a realistic assessment of the outlook for the U.S. economy as the bank tries to push inflation down from its highest levels in several decades.

“The restoration of price stability will take some time and requires the strong use of our tools to achieve a better balance between supply and demand. Lowering inflation will likely require a sustained period of flat growth. Furthermore, it is very likely that there will be some partial decline in the labor market,” said Powell, “While high interest rates, slow growth, and soft labor market conditions will lead to lower inflation, they will also cause some pain for households and businesses. And these are the unfortunate costs of reducing inflation. But the failure to restore price stability will mean much more,” he added.

Markets acknowledged widespread signs that the US economy is slowing. This is despite a clear warning against assumptions that the Federal Reserve could push back on raising interest rates further or start cutting them at some point in the first months of the new year.

The speech came as financial markets try to gauge whether federal policymakers will opt for a 0.75% sequential increase in the federal funds rate at the September meeting and amid much curiosity about how quickly the bank will raise borrowing costs to the “terminal” level during the following months.

June forecasts indicated the level was somewhere near the 4 percent handle and would likely be reached in the early months of 2023, but Chairman Powell reminded that those forecasts will be updated soon, and other federal policymakers have recently called for a steeper path.

In general, the gloomy economic outlook and the lingering upside risks regarding the path of the US interest rate in the future are some of the possible reasons why the initial dollar sales in the wake of Friday’s session did not last long, although not all observers share the same views.

Expectations of the USD/JPY:

• In the near term and according to the performance on the hourly chart, it appears that the USD / JPY currency pair has recently completed an upward breakout from the formation of a gently descending channel. This indicates the existence of a large upward wound in the short-term market sentiment.
• Therefore, the bulls will look forward to the extension of the current rise towards the resistance 137.91 or higher to the resistance 138.36. On the other hand, the bearish speculators will target short-term profits at around 137.07 or below at the 136.59 support.
• In the long term and according to the performance on the daily chart, it seems that the USD/JPY is trading within the formation of an ascending channel. This points to a large long-term upward wound in market sentiment.
• Therefore, the bulls will target the long-term profits at around 139.38 or higher at the 141.74 resistance. On the other hand, bears will look to pounce on profits at around 134.99 or lower at 132.52 support.

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EUR/USD

The EUR/USD has gone back and forth during the week, as we continue to hang around the parity level. At this point, it looks like we are taking a bit of a pause, but I think have to look at this through the prism of “fading short-term rallies” going forward. The market has gotten down to this level rather quickly, but now Jerome Powell has reiterated the hawkish attitude of the Federal Reserve, it’s likely that we will continue to see the US dollar reign supreme. I like fading rallies, especially near the 1.03 level if we get all the way up there.

GBP/USD

The GBP/USD initially tried to rally during the trading week but gave back gains as we continue to see a lot of negativity when it comes to the British pound, as the Bank of England has already stated that the United Kingdom is going into a recession. Because of this, the market is likely to continue fading rallies, and maybe even worse off than the Euro. If we were to break above the 1.20 level, then you might be able to make an argument for something else. Until then, this looks very bearish to me.

USD/JPY

The USD/JPY has pulled back slightly to kick off the week but then ended up rallying yet again. It looks as if we are eventually going to try to break above the recent highs, perhaps breaking through the ¥140 level. The ¥132 level underneath continues to be significant support, so I do like the idea of any pullback being bought into. If we break down below the ¥132 level, then we start to have other questions asked at that point. If the Bank of Japan continues to fight rising interest rates, this more likely than not will continue to be a “one-way trade.”

AUD/USD

The AUD/USD initially tried to rally during the week but gave back a lot of the gains at the 0.70 level. The market has seen a lot of volatility, and a lot of resistance at the 0.70 level. If we can break above the 0.70 level, then it is possible that we could go looking to the 50 Week EMA. However, it looks more likely than not that we are going to threaten the lows again after the Federal Reserve has spoken.

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Today there will be an important event to future recession watchers in light of the continued sharp tightening of the Fed’s policy. The US economic growth rate will be announced amid expectations of a slowdown. The USD/JPY currency pair is stable around the bullish rebound gains of 137.70, which increases expectations towards the psychological top of 140.00. The dollar/yen pair is stable around the 137.10 level at the time of writing the analysis.

Hawkish or Dovish?

Markets and investors will remain focused on Friday, when Federal Reserve Chairman Jerome Powell addresses an annual economic conference in Jackson Hole, Wyoming. This has been the place for market action rhetoric in the past, leading investors to hope that Powell will provide more clarity on a rate hike. Will it be hawkish, which is what investors call the bias towards aggressive rate increases? Or dovish, which is Wall Street’s talk of easier circumstances?

Analysts pointed to several variables that could change the Fed’s thinking ahead of its next rate policy meeting in September. They don’t think he wants to appear tough or pessimistic, maybe he wants to appear as a pigeon. They cautioned that the speech could be “nothing” with little to chew on, although the market may consider that positive given some expectations that Powell will appear hawkish.

Generally high interest rates slow down the economy in the hope of reducing inflation. But they also risk strangling the economy if they are aggressively made and drive down the prices of all kinds of investments.

Stock traders sitting still for now

Stock traders remained reluctant to make any huge bets ahead of Jerome Powell’s speech on Friday, which may provide clues to how optimistic the Federal Reserve is in the face of mounting economic challenges. These concerns did not actually go anywhere despite the controversial pivotal pacifist narrative which some have cited as one of the reasons for the short covering rebound from June lows.

Indeed, before the prestigious Jackson Hole event that Powell and global policy makers will attend, traders have had to absorb more hawkish talk. Minneapolis Fed President Neil Kashkari said late Tuesday that it was “very clear” that officials need to tighten up and get inflation under control again.

Economic reports were mixed at best, underscoring the delicate task that policy makers face in bringing down high inflation without triggering a recession. Wednesday’s data showed US pending home sales fell to the lowest level since the pandemic began. While orders from US factories for core capital goods have exceeded expectations, the picture may change in the coming months amid rising borrowing costs and uncertainty over the growth outlook.

Forecast of the dollar against the Japanese yen

• There is no change in my technical view of the performance of the USD/JPY currency pair, as the general trend is still bullish.
• I expect stability around its gains until the reaction from Jerome Powell’s statements during the Jackson Hole symposium to determine the future of raising US interest, the strength factor of the US dollar in the markets recently.
• The bulls’ destinations closest to the current performance are the resistance levels 137.85, 139.20 and 140.00, respectively.

On the downside, the support level 133.30 will be important to change the trend outlook. The currency pair will be affected today by the risk appetite of investors, as well as the reaction from the announcement of the US GDP growth rate and the number of weekly jobless claims.

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The US dollar’s gains were temporarily halted against the other major currencies after data released yesterday showed that the slowdown in the US economy may have accelerated in August. The USD/JPY pair retreated to the support level 135.80, after gains at the beginning of the week’s trading, towards the resistance level 137.70 and settled around the 136.75 level at the time of writing the analysis.

As announced, the S&P Global PMI survey of the US economy showed a sharp decline in service sector activity, with the services PMI reading at 44.1, well below the 49.2 markets expected and July’s 47.3. A reading below 50 indicates deflation. By contrast, UK Services PMI came in at 52.5 in August, which was above expectations. The US manufacturing PMI read at 51.3, but it was lower than the 52.0 that markets had expected. The Composite PMI – which adjusts readings to better reflect the broader economy – came in at 45.0, well below expectations of 49.0 and 47.7 in July.

For its part, S&P Global said the decline in production was the fastest since May 2020 and exceeded anything recorded outside the initial epidemic outbreak since the chain began nearly 13 years ago. The data indicates that the US economy is slowing amid rising inflation and higher interest rates at the Federal Reserve.

Signs of slowdown

From a forex market perspective, another sign of a slowdown will dampen investor expectations about the number of interest rate hikes the Fed is willing to deliver over the coming months. Expectations of a rate hike in the cooldown are in turn creating headwinds for the US dollar as it leads to lower bond yields.

Standard & Poor’s Global also said material shortages, delays in delivery, rise in interest rates and strong inflationary pressures have all dampened customer demand. The Fed may be tempted to slow the pace of increases given the report that companies raised their selling prices at the weakest pace in 18 months.

This data suggests a significant slowdown in the US, provided that it tracks GDP closely. “I’m a huge fan of PMIs, but even I would have treated this recession with a pinch of salt,” says independent economist Julian Jessup. “The reason for the weakness was the sharp drop in the services index, which has only a short track record, while the alternative ISM index has held up well,” he added.

Thus, the Fed will read the PMI report with interest, but it will likely not be affected by its rate hike policy. Therefore, despite the decline of the dollar, the general premise of further strength remains.

US new home sales in July were reported to have fallen for the sixth time this year to the slowest pace since early 2016, extending a months-long slump in the housing market fueled by higher borrowing costs and declining demand. Government data on Tuesday showed that purchases of new US single-family homes fell 12.6% to a 511,000 annual pace from 585,000 in June. The median estimate in a Bloomberg survey of economists called for 575,000. Overall, the fall in July sales is the latest example of how the housing market has buckled under the weight of higher prices and higher borrowing costs. Construction has slowed, home purchase orders are down, and more buyers are pulling back from deals.

Inventories are booming amid a decline in demand, which is likely to put downward pressure on home prices in the coming months. And there were 464,000 new homes for sale at the end of the month, the most since 2008. However, 90% of them were either under construction or not yet started.

Data released last week showed that housing starts fell in July to the slowest pace since early 2021, and sales of existing homes – which make up most of the market – fell for the sixth month in a row to the lowest level in more than two years. The New Home Sales report, released by the Bureau of Statistics and the Department of Housing and Urban Development, showed that the median sales price for a new home rose 8.2% from the previous year to $439,400, the slowest pace of price increases since late 2020.

Dollar yen forecast today:

• The general trend of the USD/JPY currency pair is still bullish.
• The currency pair may remain stable around its gains until the reaction from the Jackson Hole symposium and the Federal Reserve’s hints about the future of raising US interest rates, the most important factor for the dollar in achieving its gains.
• Currently, the nearest resistance levels for the currency pair are 137.75 and 138.40, and from there to the historical peak of 140.00.

On the downside and according to the performance on the daily chart, there will be no break in the current trend without the currency pair moving towards the support levels 134.70 and 133.00, respectively.

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A surging US dollar threatens to end the nascent rally in the yen, just as speculators have abandoned betting on the Japanese currency. The USD/JPY currency pair started this week’s trading with the same performance as last week by moving upwards, and its gains reached the 137.65 support level, before settling around the 137.50 level in the beginning of Tuesday’s trading. The US dollar jumped nearly 3% against the Japanese yen last week, buoyed by higher Treasury yields as traders braced for the Federal Reserve’s hawkish commentary at the upcoming Jackson Hole Symposium. The strength was broad as the greenback rose against all of its G10 peers, but it put the dollar-yen back on track to rush towards the closely watched record 140.

The renewed strength of the US dollar comes at a time when currency traders were inclined to the opinion that the worst losses of the year for the yen were behind it. The currency was hit hard by a widening interest rate gap between the US and Japan, higher oil prices and a weakening of its safe haven status, but it has rebounded since mid-July as hedge funds covered short positions.

Leveraged investors cut their net bearish bets to the lowest level since March 2021, according to the latest data from the Commodity Futures Trading Commission. While further strength in the US dollar could reignite one of the hottest macro trades of the year, yen watchers now see any pullback as temporary. But paying over $140 per dollar would renew pressure on the Bank of Japan over its super easy monetary policy and on the government to step in.

Commenting on the performance of the currency market. “USD/JPY may approach a year high at 139.39 as the market price in Powell’s hawkish speech,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo, wrote in a note on Monday. “But given that the dollar appears to be rising faster in light of US yields, the pair may also be vulnerable to a fall after his speech as markets take into account the tightening.”

Federal Reserve Chairman Jerome Powell is expected to reiterate the US central bank’s intention to continue raising interest rates to contain inflation in his speech on Friday, eliminating speculation of a rate cut next year. In this regard, said Shinsuke Kajita, chief analyst at Resona Holdings in Tokyo: “The dollar may be supported before the emergence of Jackson Hole on the back of the Fed’s hawkish expectations with a dollar-yen range between 134 and 139 levels.” “But the pair could get heavy as the dollar’s ​​rally also has an element of risk aversion which could be reflected in the strength of the Japanese yen.”

USDJPY Technical Analysis:

• There is no change in my technical view of the USD/JPY currency pair, as the trend is still bullish.  
• Breaking the resistance 138.30 will strengthen expectations for a more important upward move, which is the historical psychological resistance 140.00.
• Many forex traders may be interested in this for short positions in anticipation of profit-taking operations.

On the other hand, on the daily chart, the move towards the support levels 135.40 and 133.00 will be important to change the current bullish trend. The currency pair will be affected today by the risk appetite of investors and the reaction from the announcement of the PMI readings for the manufacturing and services sectors and the US home sales.

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Sudden change in market sentiment from bearish to bullish.

Last week’s trading was in favor of the bulls’ strength and control over the direction of the USD/JPY currency pair, as the currency pair moved in this path towards the 137.24 resistance level, the highest for the currency pair in nearly a month. This performance restored the currency pair’s bullish expectations to move towards the psychological resistance level of 140.00 again. In the middle of last month’s trading, the dollar-yen pair jumped towards the resistance level of 139.38, the highest for the currency pair in 25 years. I often recommended buying the dollar-yen from every descending level until the currency pair fell towards the 130.40 support level at the beginning of this month’s trading.

The results of the recent US economic data have removed many doubts about the future of the US economy stagnation in light of the continued hike in interest rates by the Federal Reserve, which brought back the strong impetus to think of buying the US dollar again.

USD/JPY Fundamental Analysis

The USD/JPY currency pair is trading higher after investors interpreted the minutes of the FOMC meeting last Thursday as an indication that the Federal Reserve has not finished raising US interest rates yet. The announcement came on the back of promising claims data, with initial US jobless claims last week at 250K, well below expectations of 265K.

Continuing claims for the previous week also exceeded 1.438 million with 1.437 million recorded. Prior to that, US retail sales figures also came in better than expected although general retail sales did not miss the estimates.

In Japan, the national CPI for July beat the expected change (annualized) by 2.2% with a change of 2.6%. On the other hand, the CPI for food and energy products beat expectations by 0.6% (1.2% yoy), while the CPI for non-fresh food was in line with expectations by 2.4%. Prior to that, Japanese exports and imports also exceeded expectations by 18.2% and 45.7% respectively, with 19% and 47.2% (y/y), while the merchandise trade balance for this month missed expectations.

Commenting on the performance of the US dollar. “The bigger picture for the dollar is that it is in a strong uptrend,” said Matt Simpson, senior analyst at City Index brokerage in Brisbane, adding that it halted a weeks-long decline. “In some ways, the bulls are looking to pull back and I think the Fed minutes gave them a reason to do so,” he added.

The minutes of the last meeting of the US Federal Reserve showed that bank officials saw “little evidence” late last month that inflation pressures in the United States were easing. The minutes noted an eventual slowdown in the pace of the increases, but not the shift to the cuts in 2023 that traders until recently were pricing in interest rate futures.

For his part, Philip Marie, strategic analyst at Rabobank, said in a note to clients, “Once they reach a sufficiently restrictive level, they will stick to that level for some time.” And “obviously, this contrasts with the early Fed pivot that markets were pricing in.” Investors expect there is a 39% chance of a US interest rate hike of 75 basis points in a row in September, and they expect rates to peak around 3.7% by March, and hover there until later in 2023.

USD/JPY Technical Analysis

In the near term and according to the performance on the hourly chart, it appears that the USD/JPY is trading within an ascending channel formation. This indicates a significant short-term bullish momentum in market sentiment. Therefore, the bulls will look to ride the current wave of gains towards 136.84 or higher to 137.45. On the other hand, the bears will look to take profits at around 135.69 or lower at 134.99.

In the long term and according to the performance on the daily chart, it appears that the USD/JPY pair recently completed an upward breach of the descending channel formation. This indicates a sudden change in market sentiment from bearish to bullish. Therefore, the bull will look to extend the current rally towards 139.47 or higher to the resistance 142.50. On the other hand, the bears will target long-term profits at around 133.26 or lower at 130.23 support.

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• The bullish retracement path of the USD/JPY currency pair this week was capped by testing the resistance level 135.50 before settling around the 135.10 level in the beginning of trading today, Thursday.
• The dollar yen gained further after the release of the minutes of the latest meeting of the US Federal Reserve. and US retail sales figures.
• US central bank officials saw signs of weakness in the US economy at their last meeting, but still described inflation as “unacceptably high” before raising the benchmark interest rate by a significant three-quarters of a point in their quest to slow price increases.

The pace of sales at US retailers was reported unchanged last month as persistently high inflation and rising interest rates forced many Americans to spend more cautiously. Retail purchases were flat after rising 0.8% in June, the Commerce Department reported, and economists had been expecting a slight increase.

However, yesterday’s report contained some positive signs: Excluding autos and auto parts, retail sales rose 0.4% in July. Lower gas prices will likely free up money for people to spend elsewhere. Gasoline sales fell 1.8%, reflecting lower pump prices. Sales of building supplies and garden equipment were halted, as were sales in electronics and hardware stores. Meanwhile, consumers remained wary of spending too much on non-essentials: sales fell 0.5% in supermarkets and 0.6% in clothing stores.

Compared to the previous 12 months, total US retail sales rose 10.3% in July.

Inflation Affecting US Economic Activity

American consumers, whose spending accounts for nearly 70% of US economic activity, remained mostly resilient even as year-round inflation neared four-decade highs, growing economic uncertainty and rising costs for mortgages and money borrowing. However, public spending has weakened, increasingly turning towards things like groceries, and away from less important things like electronics, furniture, and new clothes. The government’s monthly report on retail sales covers about a third of all consumer purchases and does not include spending on most services, from plane prices and apartment rentals to movie tickets and doctor visits. In recent months, Americans have shifted their purchases away from physical goods and more toward travel, hotel accommodations and plane rides.

Inflation continues to be a severe struggle for many families. Although gasoline prices have fallen from their highs, food, rent, used cars and other necessities are becoming much more expensive, exceeding any wage increases that most workers have achieved. Despite the US labor market, which remains strong, the US economy contracted in the first half of 2022, raising fears of a possible recession. Growth has been weakening largely as a result of higher interest rates by the Federal Reserve, which are intended to calm the economy and tame high inflation.

US Dollar Against Japanese Yen Forecast

On the daily chart, technical indicators are heading higher, which provides the momentum for the USD/JPY currency pair. Besides, the momentum factors for the stronger US dollar, which is still a safe haven, and the economic performance of the United States supports the path of tightening the Fed’s policy, and we do not forget that the dollar pair Yen headed towards its highest in 25 years and was the closest to testing the psychological peak of 140.00. Technical indicators have not yet reached overbought levels, so no profit-taking is expected.

On the downside, the closest support levels for the dollar pair are 134.20 and 133.00, respectively. The US dollar will be affected today by the announcement of the Philadelphia manufacturing index, the number of jobless claims, and then the US existing home sales.

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It looks like we are threatening a major breakout.

The US dollar has rallied during early trading on Wednesday to reach the 50 Day EMA against its Japanese counterparts. Because of this, it looks like we are threatening a major breakout, and if we can get above the highs of the trading session, it’s very likely that the US dollar will continue to climb and go looking toward the highs yet again.

The FOMC Meeting Minutes came out during the day, and some traders thought of them as being a bit dovish. Because of this, we have seen a bit of a pullback from the highs of the day, but it’s also probably worth noting that the pullback was relatively small, so there still seems to be a certain amount of conviction. I believe that the uptrend is still very strong, and it is probably only a matter of time before we see buyers resume their efforts.

• Pullbacks at this point should be thought of as potential buying opportunities, especially near the ¥131 level.
• I think there is a lot of support near the ¥127 level as well.
• We are essentially looking at the ¥127 level as a “floor in the market”, and a “flooring the trend”, at least for the time being.

On the upside, we have the ¥140 level as a potential target, but it’s probably going to take a while to get there. The ¥140 level is a large, round, psychologically significant figure in an area that we have seen a lot of fighting at in the past. It would not surprise me at all to see the market test that area again and cause a lot of noise once it gets there.

What Do We Anticipate for USD/JPY?

I anticipate that the USD/JPY market will continue to be very noisy and erratic, following the bond markets as the Bank of Japan continues to fight higher yields. They are essentially doing the same thing as printing yen consistently, while the rest of the world is tightening monetary policy. This is why all Japanese yen-related currency pairs are moving in lockstep at the moment because this is more about Japan than anything else currently. If we see yields rise in the United States, that only adds more fuel to the fire.

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Since the start of trading this week, the bulls have been trying to control the performance of the USD/JPY currency pair. The rebound gains stopped at the 134.68 resistance level, until the markets and investors interacted with the announcement of the minutes of the last meeting of the US Federal Reserve. It will give a clearer picture of the future of raising US interest rates.

Economic Outlook

A report from the Federal Reserve showed that US industrial production increased more than expected in July. The Federal Reserve said industrial production rose 0.6 percent in July after an unchanged revised reading in June. Economists had expected industrial production to rise 0.3 percent, compared to a 0.2 percent decline originally reported from the previous month.

The larger-than-expected increase in industrial production came with industrial production advancing 0.7 percent in July after declining 0.4 percent for two consecutive months. Mining production also rose 0.7 percent in July after jumping 2.0 percent in June, while utility production fell 0.8 percent after declining 0.3 percent. The report also showed that capacity utilization in the industrial sector rose to 80.3 percent in July from a revised 79.9 percent in June. Economists had expected capacity utilization to come to 80.1 percent from originally 80.0 percent from the previous month.

US Housing Market

New residential construction in the United States fell much more than expected in July, according to a report from the Commerce Department. The report showed that homes started fell 9.6 percent to an annual rate of 1.446 million in July after falling 2.4 percent to an average of 1.559 million in June. Economists had expected housing starts to fall 1.2 percent to a rate of 1.540 million.

With the decline sharper than expected, new homes reached their lowest annual rate since they reached 1.430 million in February of 2021. The Commerce Department said single-family homes fell 10.1% to 916,000, while multi-family starts fell 8.6%. to 530,000. Building permits, an indicator of future housing demand, also fell 1.3 percent to an annual rate of 1.674 million after rising 0.1 percent to a revised rate of 1.696 million in June.

Economists had expected building permits to decline 2.1% to an annual rate of 1.650 million from 1.685 million originally reported for the previous month. Single-family permits fell 4.3 percent to 928,000, which more than offsets a 2.8 percent jump in multi-family permits to 746,000.

USD/JPY Technical Outlook:

The recent gains in the USD/JPY currency pair moved the direction of the technical indicators to the upside. If the US retail numbers come today and the content of the minutes of the last meeting of the US Federal Reserve is in favor of the bank’s tightening path, the bulls may have the momentum of more launch to higher and closer levels.

• The resistance for the currency pair is currently 135.60, 136.30 and 137.40, respectively, and the last level is pushing the technical indicators towards overbought levels.
• The pair’s current direction may change if it moves towards the support levels 132.50 and 131.00, respectively.
• We prefer buying the pair from every bearish level.

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