Since the start of this week’s trading, the price of the USD/JPY currency pair has been moving in the same path as the closing of last week’s trading. This is during an upward momentum that succeeded in moving towards the resistance level 123.68. It restores expectations of the psychological top 125.00 momentum to move to it as soon as possible. The recent gains of the US dollar in the forex trading market will be important today, as the contents of the minutes of the last meeting of the US Federal Reserve will be announced.
Expectations so far are still strong for the future of the Fed’s tightening policy, and we do not expect anything new to be presented in the minutes except to confirm that.
After reporting a slowdown in the pace of growth in US service sector activity over the past few months, the Institute for Supply Management released a report showing that growth in the sector accelerated in March. The ISM said that its services PMI rose to a reading of 58.3 in March from a reading of 56.5 in February, and any reading above the 50 level indicates growth in the sector. Economists had expected the index to rebound to a reading of 58.0.
The slightly larger-than-expected increase in the services PMI came after three consecutive monthly declines after the index hit a record high in November. The recovery of the main index came with the rise of the new orders index to a reading of 60.1 in March from a reading of 56.1 in February. The business activity index also rose to 55.5 from 55.1. The report showed that the employment index also rebounded to a reading of 54.0 in March from a reading of 48.5 in February, indicating job growth in the service sector after the contraction in the previous month. The inventories index also rose to a reading of 51.7 in March from a reading of 50.8 in February, while the supplier delivery index fell to 63.4 from 66.2. On the inflation front, the price index rose to 83.8 in March from 83.1 in February, reaching its second highest reading ever after 83.9 in December.
Last Friday, the ISM released a separate statement showing that US manufacturing activity unexpectedly grew at a slightly slower rate in March. The manufacturing PMI fell to a reading of 57.1 in March from a reading of 58.6 in February, while economists had expected the index to rise to 59.0.
According to the technical analysis of the pair: The general trend of the USD/JPY currency pair is still bullish, and its recent gains pushed the technical indicators towards strong overbought levels. Investors may ignore this if the momentum of the US dollar continues to achieve more gains and that this event will be top of the line. 125.00 is the importance of bulls dominating the highest target for the pair in six years. Unless the dollar gains momentum, the dollar-yen currency pair may be exposed to a profit-taking sale at any time.
There will be no reversal of the dollar-yen trend without moving towards the 120.00 support – the previous psychological top – the pair may remain in a limited range until the reaction from the announcement of the minutes of the last meeting of the US Federal Reserve.