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USD/JPY Technical Analysis: Stability is Bullish – 17 May 2022

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At the end of last week’s trading, the price of the USD/JPY currency pair is stabilizing this week, as it is the closest to breaching the 130.00 psychological resistance again. This is the important level for more bulls’ control. Before the end of last week’s trading, the currency pair was exposed to profit-taking operations that pushed it towards the 127.52 support level and settled around the 129.45 level at the time of writing the analysis, before announcing a package of important US economic data.

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So far, much remains to be determined by the market’s appetite for the US dollar, which has benefited greatly from the deteriorating global economic outlook reflecting the “lockdowns” in China, persistently high inflation rates around the world and the monetary policy of the Federal Reserve. Inflation is putting pressure on household incomes and pushing global central banks into a corner where there are few good policy options.

Federal Reserve Chairman Jerome Powell said last week: “I just got back from a bunch of meetings with central bankers from around the world, and we all have the same kind of problems and the public is having the same kind of problems.” And I would say that we fully understand and appreciate how painful it is with inflation, that we have the tools and the determination to bring it down to 2%, and that we are going to do it. I will also say that the process of bringing inflation down to 2% will also involve some pain.”

Which is why the market is likely to pay close attention to Federal Reserve Chairman Jerome Powell when he talks about inflation at the Wall Street Journal’s Future of Everything festival in New York on Tuesday. It is scheduled to appear at 19:00 London time and comes before various appointments of other Fed policy makers as well as the release of US retail sales numbers for April, which are also likely to be closely scrutinized by the market.

According to the technical analysis of the pair: As I mentioned before, the breach of the 130.00 psychological resistance will be of particular importance for the bulls to further control the performance of the USD/JPY currency pair, thus preparing to move towards stronger upward levels. Today’s US data, includes US retail sales and industrial production, and statements by US Federal Reserve Governor Jerome Powell, will form the supporting factors for investors to move the price of the currency pair in one direction. On the daily chart, the break of the support 126.80 will be important in changing the general trend to a bearish one.

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