USD/JPY Analysis: Bearish Pressure Intensifies – 22 August 2024

-- The Japanese yen is hovering near its highest level in two weeks.
-- With increasing pressure on the US dollar against other currencies, especially after the announcement of the minutes of the last meeting of the US Federal Reserve, the USD/JPY currency pair fell to the support level of 144.45, its lowest in two weeks, before settling around 145.20 at the beginning of trading on Thursday.
-- The currency pair's price movements increased amid mixed expectations for monetary policy in Japan and the United States.
-- The sharper-than-expected growth in Japanese GDP in the second quarter was consistent with ongoing bets that the Bank of Japan is set to raise interest rates again this year.

Also, this was supported by research from Bank of Japan staff that indicated inflationary pressures in the Japanese economy are expected to persist. Meanwhile, Bank of Japan Governor Kazuo Ueda is due to testify before the Japanese parliament on Friday as lawmakers examine the central bank’s decision to raise interest rates in July. Elsewhere, minutes from the latest Federal Reserve meeting indicated that policymakers agreed that a rate cut would be appropriate in September if the US economy continues to contract, adding pressure to the USD/JPY pair.

On the stock trading platform front, Japanese stocks fell as the yen strengthened. The Nikkei 225 index fell 0.29% to close at 37,952 while the broader TOPIX lost 0.21% to close at 2,665 on Wednesday, giving up some of the previous session’s gains as the yen resumed its rally, weighing on domestic stocks. Clearly, a stronger yen hurts earnings prospects for Japan’s export-dependent industries and forces investors to unwind carry trades.

Meanwhile, Japanese stocks recorded losses on Wall Street overnight as investors turned cautious ahead of the latest minutes of the Federal Reserve's monetary policy meeting. On the economic front, data showed that Japan's trade deficit widened in July as exports grew less than expected while imports accelerated. According to trading data, technology stocks led the decline, with sharp losses from Lasertec shares (-3.2%), Disco Corp shares (-2.8%), Tokyo Electron shares (-1.4%), Advantest shares (-2%), and Renesas Electronics shares (-1.6%).

On the US labor market front, the latest revision by the Bureau of Labor Statistics showed that US job growth for the year ending March 2024 was weaker than initially reported, with 818,000 fewer jobs added. This significant downward revision suggests that the labor market has been cooling more quickly than previously thought, with an average of 68,000 fewer jobs per month. In early August, the Bureau of Labor Statistics reported that the US economy added 114,000 jobs in July 2024, well below the downwardly revised 179,000 in June and expectations of 175,000.

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USD/JPY Technical Analysis and Expectations Today

Based on the daily chart below, the bearish trend in USD/JPY is getting stronger and the most important support levels for more bear control will be 143.80 and 142.00 respectively. As we mentioned before, the psychological resistance at 150.00 will remain the most important for bulls to control the trend. Technically, the currency pair may remain in its current performance until the reaction to the comments of the US Federal Reserve Chairman Jerome Powell during the Jackson Hole Symposium.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.