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USDJPY - US Confidence Falls

The US Dollar against the Japanese Yen again increased close to the yearly high of 136.700, even as the US announced the worst consumer confidence since 02/2021 when the economy was under heavy restrictions due to COVID-19. The Fed’s bankers are continuing to attempt to calm markets, but at the same time, the predictions of economic contraction are coming thick and fast.

The price of the USD/JPY is at a significant crossroad as traders are contemplating whether the price has the strength to be able to break through the latest resistance level which is at its highest since the 1990s. It is understandable that the price is slightly losing momentum as traders become uncomfortable with the extremely high price, but this does not mean that further developments cannot push the price into a further bullish trend.

The price of the USD/JPY has increased by 18.30% over the last 4 months alone, which is deemed to be a significant amount for a currency. The weekly candlestick remains bullish and is the fifth bullish candlestick formed. Today the price is slightly lower after forming a retracement last night.

USDJPY - 29.06.2022.jpg

One of the main talking points of the past 24 hours has been the US Consumer Confidence, which has dropped to 98.7 from 103.2 the previous month. This was a much stronger decline than expected by the market.

The announcement actually increased the demand for the US Dollar as traders sold higher-risk assets such as cryptocurrencies, corporate bonds, and stocks. As a result, the SNP500 declined by 2.05% and Bitcoin declined by 3.45%. Traders turned to the US Dollar which is known to be a safe haven in times of uncertainty. Uncertainty and low-risk appetite, paired with higher interest rates, may have the ability to further fuel trends.

Yesterday, the Core Consumer Price Index for Japan was released. The figure rose from 1.4% to 1.5% which was as expected by the market and therefore had minimal impact. In general, inflationary pressure within the economy of Japan continues to grow, but so far it has not prompted the central bank to increase interest rates or give such indications. According to the regulator, they do not have the ability to increase interest rates due to economic vulnerability. This morning Japan also released its sales figures which increased to 3.6% but fell short of the expected 4%.

Today, the market’s attention will mainly be focused on the meeting between the Fed, ECB, and BOE which is scheduled for this afternoon at 16:00. The market will be closely monitoring whether the heads of the world’s main central banks will comment on the economic outlook for the next 5-6 months, as well as for indications on interest rate hikes.

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