- The performance of the USD/JPY pair last Friday completely changed its performance throughout the week, as it was sold off throughout the week with losses extending to the support level of 145.90.
- In the same session, it jumped to the resistance level of 148.58 following the announcement of stronger-than-expected US jobs figures, which confirmed the strength of the US economy despite the pace of raising US interest rates.
- Moreover, this reversed expectations that the economy is heading for a recession under that policy.
In January, US companies and other employers added a total of 353,000 jobs – the largest monthly increase in one year. Also, the government revised its estimate for job gains in November and December by 126,000 jobs. The data provided compelling evidence that most companies, large and small, are confident enough in the economy to continue hiring. Concurrently, many of the companies that have announced layoffs are among the most well-known names: Google, Amazon, eBay, UPS, Spotify, and Meta, the parent company of Facebook. And they weren't the only ones. Challenger, Gray & Christmas, a leading outsourcing firm, reported this week that companies announced 82,000 layoffs in January, the second-highest number of layoffs in January since 2009.
On the other hand, US stock markets felt pressure from much higher returns in the bond market after a report showed that US employers hired a much larger number of workers last month than economists expected. While the strength is a boon for workers and keeps the risk of recession at bay, the concern is that it could maintain some upward pressure on inflation. Consequently, this could mean a longer wait for the Federal Reserve to start cutting US interest rates.
Hopes for such cuts, which could ease pressure on the economy and raise investment prices, were a major reason why the US stock market rose to record levels. Federal Reserve Chairman Jerome Powell said earlier last week that cuts were unlikely to begin as soon as traders had hoped. Meanwhile, traders had already pushed bets on the timing of the Fed's first US interest rate cut to May from March following Powell's warning earlier last week. After the jobs report, traders shifted some bets further out on the calendar into June, according to data from CME Group.
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In addition to the total US employment number, the jobs report included several signs showing much greater strength than expected. Average hourly wages for workers rose more than expected in January. Unexpectedly, the unemployment rate did not deteriorate. The US government added that hiring was much stronger in December than it had previously reported. Therefore, the question for the stock market is whether the upside of this strength outweighs the downside. In other words, will a stronger economy create enough of an increase in corporate profits to make up for delayed or dashed hopes for rapid and large interest rate cuts?
USD/JPY Technical Analysis and Expectations Today:
According to the performance on the daily chart below, and as we mentioned before, the success of the bulls in pushing the price of the currency pair US Dollar against the Japanese Yen “USD/JPY” above the resistance of 148.50 will push the next stronger upward move towards the psychological resistance level of 150.00. Obviously, this confirms the strength of the upward trend, and at the same time the indicators may move. The technical level is heading towards strong saturation levels with buying. Thus, the idea of selling to make profits begins. The recent performance confirms the success of our view of recommending buying the US dollar against the Japanese yen “USD/JPY” from every falling level.
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