USD / JPY technical analysis: bullish stability
Like last week, USD / JPY is stable around the resistance level of 114.47, close to its high for over a month. It comes amid a wave of risk appetite and the Japanese yen’s abandonment as a safe haven amid markets optimism about omicron, in addition to growing expectations that the date of the hike will be higher. US interest rates will be earlier than expected. More recently, we noted the stagnation of inflation-adjusted US consumer spending in November, with the fastest price increases in nearly four decades eroding purchasing power. Commerce Department figures last week showed purchases of goods and services, adjusted for higher prices, little changed after rising 0.7% in October. The so-called nominal expenditure, not corrected for inflation, increased by 0.6%, corresponding to the average estimate of economists.
The yen is a popular asset during times of turbulence.
There are a series of crosscurrents underlying the spending figures. Many Americans, amid the headlines on crowded supply chains, started shopping for the holidays earlier than usual this year, which helped explain the strong advance the month before. But at the same time, consumers are also facing the fastest inflation in decades. With every trip to the grocery store and gas pump consuming a bit of their paycheck, people have less leftovers for discretionary purchases. And the new omicron variant for COVID-19 threatens to dampen the initial rebound in spending on services.
The report showed that Americans are spending more on basic necessities amid rising prices. Money spent on housing and utilities increased over the past month, as did spending on gas and food. Data showed inflation-adjusted spending on services rose 0.5%, the highest in three months, while spending on goods fell 0.8%, the first decline since July.
The S&P 500 has advanced and is trading near its all-time high. Treasuries fell, while the dollar rose.
In the eyes of economists and analysts, a flat reading of real consumer spending in November – even before Omicron’s impact – suggests that inflation may start to affect consumer resilience until the end of the year. . The increase in services has been widespread, which is a positive sign.
According to official figures, the price measure of personal consumption expenditure, which is used by the US Federal Reserve to meet the 2% inflation target, increased 0.6% from the previous month and 5 , 7% compared to November 2020, the highest figure since 1982. It was these figures which are in line with the expectations of economists. This was followed by an annual increase in the Ministry of Labor’s consumer price index, which was also the fastest since 1982.
The data follows a hawkish approach by Fed officials, who have come under pressure to take action against the rate hike. The US central bank recently announced that it would speed up the end of its asset purchase program, and new interest rate expectations indicate that policymakers are in favor of increasing borrowing costs by three-quarters of a percentage point next year.
As I mentioned earlier, stability above resistance at 114.20 will continue to support bullish performance and move towards higher resistance levels namely 114.75, 115.20 and 116.00 . These support the movement of indicators towards strong overbought levels. In contrast, bears are hopeful if they return to the 113.50 stance zone.