Despite the varying numbers of jobs and wages in the United States of America, the price of the currency pair USD/JPY jumped to the resistance level of 131.35. This is the highest for the currency pair in 20 years, before settling around the 130.30 level in the beginning of trading today, Tuesday. The recent economic figures did not move anything in the expectations of raising US interest rates strongly during the year 2022, which is the strongest factor for record gains for the US dollar against the rest of the other major currencies.

The US dollar gains this week on an important date with the announcement of US inflation figures. Some consensus metrics suggest that economists generally expect the more significant core inflation to accelerate from 0.2% to 0.4% m/m in the US during April in what may be an unhelpful outcome for those in the market.

The occurrence of a peak and subsequent decline in the annual rate of inflation in the US is critical if the US Federal Reserve is to be prevented from raising interest rates at the same pace that was ruled out at least temporarily in its monetary policy decision in May last week.

Overall, one month’s reading doesn’t tell us much. “We want to see evidence that inflation is moving in a direction that gives us more comfort,” Fed Chairman Jerome Powell said following last week’s policy decision. Like I’d say we have two months now where core inflation is a little lower, but we don’t see that as a reason to feel some relief. I think we really need to see that our expectations come true. He added in the last press conference that inflation is under control and has begun to decline.

According to the technical analysis of the pair: There is no change in my technical view of the price performance of the USD/JPY currency pair, as the general trend is still bullish. The psychological top 130.00 is a culmination of the extent to which the bulls control the trend. Forex investors do not care about technical indicators reaching overbought levels after the pair’s recent gains. Continuing factors of the dollar’s strength, especially the future tightening of the US Federal Reserve’s policy, will remain an important factor for the bulls.

Currently, the best selling is waiting for profit taking operations from the resistance levels 131.30 and 132.20, respectively. On the other hand, it broke the support 128.00, a first penetration for the current upward trend. Amid the absence of the economic calendar today of important and influential US and Japanese data, investor sentiment, whether or not to risk appetite, will be an important factor for the currency pair’s movement.

The downward trend of the EUR/USD currency pair is continuing. This path pushed the most popular currency pair in the forex market to the 1.0514 support level, the lowest in five years, and settled around the 1.0555 level at the time of writing the analysis.

The decline continued amid investor concerns about growth and threats to energy supplies from Russia. The single European currency, the euro, tumbled past the lowest level it reached in the first weeks of the coronavirus pandemic in March 2020, after Russia said it would cut gas to Poland and Bulgaria. There is now a possibility that the euro will close in April without its 20-year bullish trend, which could put parity with the dollar on the horizon.

In contrast, gains in the dollar accelerated and Russia’s arming of energy exports add to headwinds for the European currency, including the European Central Bank’s relatively more cautious stance on monetary tightening than the US Federal Reserve.

Traders, who requested anonymity because they are not authorized to comment on the forex foreign exchange market publicly, said that the currency’s decline since the New York close saw significant momentum in sell orders below the target low.

The European Union has rejected its demands to pay for Russian gas in rubles, but deadlines are now running out and governments need to decide whether to accept Russian President Vladimir Putin’s terms or lose vital supplies. Concerns about global growth caused by the worsening virus outbreak in China also boosted the dollar at the expense of the single European currency.

On the future performance of the euro-dollar: Some analysts are of the opinion that a depreciation of the euro-dollar exchange rate could move it close to it, or achieve 1:1.

The Eurozone energy shock intensified in the last hours after news emerged that Russia would suspend gas supplies to Poland and Bulgaria. The reason Russia cited was the two countries’ failure to comply with their demand to pay for gas in rubles. For its part, Poland says it was prepared for this possibility, but indicates that Russia is increasingly ready to arm its energy exports. According to the performance, the exchange rate of the euro against the dollar fell from its highest levels near 1.15 before the outbreak of the war in February to 1.0515 today, as analysts say that the war poses significant threats to the growth of the euro area and the European Union.

Jeremy Bolton, market analyst at Reuters, says the chance of EUR/USD falling below parity is greater now than it was during the eurozone debt crisis in the early 2000s. Bolton added, “Demand for the dollar resulting from significant tightening in US monetary policy is likely to lead to a larger decline than in 2015 when bets on the end of the single European currency drove traders into a record sell-off and the pair fell to 1.0457.”

The analyst notes that the current betting shows traders are “gambling high” — confirming the view that the parity decline is not crowded. And when sites get crowded, it’s actually a headwind for movement, but when the market is relatively uncrowded, the “clear air” ahead of you allows the trend to extend. “In 2015, the policies of the European Central Bank were designed to save the euro. The current policies are weighing on them and there is the potential for a bigger disagreement with the Fed, not only to raise interest rates in a big way but also to reduce the balance sheet. This could push the EUR/USD pair much lower.”

According to the technical analysis of the pair: So far, the general trend of the EUR/USD currency pair is still bearish. As mentioned before, the continuation of the weakness factors supports the current trend, the most prominent of which is the continuation of the Russian war and its repercussions. It is also in addition to the position of central banks towards tightening their policy, and the US Federal Reserve is leading this. Forex traders do not care about technical indicators reaching oversold levels and the persistence of weakness factors that open the way for a level test.

The bearish trend is stronger and the closest to it is currently 1.0500 and 1.0380, respectively.

On the upside, and according to the performance on the daily chart, the EUR/USD pair needs to break the psychological resistance currently 1.1000. Otherwise, the trend will remain bearish, and I still prefer to sell the EUR/USD from every ascending level. The euro-dollar pair is awaiting the announcement of German inflation figures, then US economic growth figures and weekly jobless claims.

The Japanese yen collapsed a lot against the rest of the major currencies and against the US dollar, with losses that pushed the price of the US dollar pair against the Japanese yen USD/JPY towards the 119.39 resistance. It closed the week’s trading near it, as the pair’s gains are the highest in five years. The Japanese yen’s decline came as investors combed through the US central bank’s latest monetary policy decision. Tokyo is experiencing tepid economic growth, along with rising price inflation. Nevertheless, the Bank of Japan (BoJ) left the benchmark short-term rate at -0.1%, which was widely expected by market analysts. The negative rate has remained the same since 2016.

Central Bank of Japan Governor Hirohiko Kuroda has predicted that the Ukraine crisis will affect many components of the world’s third largest economy, especially regarding inflation. “The biggest impact on the Japanese economy from the Ukraine crisis is the rise in raw material costs,” he said. Japanese inflation is likely to accelerate significantly for the time being. But it also weighs on the economy from a long-term perspective by lowering corporate profits and household real income.”

That will depend on future crude oil price movements and government steps to cushion the blow. But we can see inflation moving around 2% for some time from April. Higher costs will lead to higher inflation. But it weighs heavily on households and corporate profits, and could have a negative impact on Japan’s economy. We will patiently maintain strong monetary easing to achieve sustainable and stable inflation.”

The BoJ’s pessimistic stance is very different from that of the Federal Reserve and the Bank of England (BoE), two institutions that raised interest rates to curb inflation.

On the economic side, according to the Japanese government, annual inflation rose 0.9% in February, up from a reading of 0.5% in January. Core inflation advanced 0.6% year-on-year last month, in line with market expectations. On a monthly basis, the Consumer Price Index (CPI) rose 0.4%, up from 0% in January. Among other economic data, Japanese industrial production fell 0.8%, machinery orders fell 2%, and capacity utilization contracted 3.2%.

Japanese trade data was mixed in February. Where imports grew 34%, above market expectations of 28%. Exports rose 19.1%, below the average estimate of 21%.

The fading strength of the US dollar confirms the suspicions of some analysts that the market has effectively satiated expectations of a rate hike from the Federal Reserve, thus providing diminishing returns to dollar bulls. Commenting on this, Valentin Marinov, Forex Analyst at Credit Agricole says, “The US dollar is still the king of the high-yield and safe haven G10. However, price action following the March FOMC meeting highlighted that there are limits to which the increased interest rate advantage can support the US dollar across the board.”

Meanwhile, some analysts point to a historical tendency for the US dollar to fall after the first rate hike in the Fed’s raising cycle. Accordingly, Adam Cole, FX analyst at RBC, said: “A worn market axiom, which says selling the US dollar at the first Fed rate hike, is trading with additional momentum after the US dollar failed to rally in the wake of last week’s FOMC optimism.”

According to the technical analysis of the pair: So far, the general trend of the USD/JPY pair is still bullish. At the same time, it is worth noting and emphasizing that the recent gains of the USD/JPY pair moved the technical indicators towards overbought levels, unless the US dollar gains more momentum. Profit-taking may be activated at any time. This is expected strongly, especially after the storm of US interest rate decisions has passed from the US Federal Reserve.

According to the performance on the daily chart, breaking the current trend requires moving towards the support levels 117.35 and 116.20, respectively. Otherwise, the bulls’ control will remain in place for some time.