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Analysis of the US dollar against the Japanese yen (USD/JPY): All eyes are on US growth


Bullish stability dominates the performance of the price of the US dollar against the Japanese yen (USD/JPY). Ahead of the announcement of the US economic growth reading later today, the price of the US dollar/JPY stabilizes around the resistance level of 15060. As I mentioned before, the discrepancy between the US central bank’s strict policy and the US central bank will remain. Japan has negative interest rates alone compared to other global central banks, a factor that supports the currency pair's gains for a longer period.

But what is expected for the price of the US dollar in the coming days?

Flows at the end of February are likely to lead to a weaker US dollar, according to Credit Agricole's assessment of potential flows in the forex market at the end of the month. According to analysts at the European Bank, the performance of the US dollar in February indicates a moderate sell-off in the US dollar at the end of the month, especially against the Canadian dollar and the Australian dollar.

According to Credit Agricole analysts, “Global stock markets were broadly more stable in February. In the Forex market, the US dollar was broadly firmer during the month. In general, movements in equity markets, when adjusted for market capitalization and foreign exchange performance this month, indicate that portfolio rebalancing flows at the end of the month. There is likely to be moderate selling of the US dollar across the board with the strongest sell signal in the case of the US dollar against the Canadian dollar and the Australian dollar.”

But what is rebalancing at the end of the month?

Credit Agricole explains that global portfolio managers re-hedge their currency exposure at the end of the month to maintain currency benchmarks, influenced by the change in equity performance and FX movements. This rebalancing activity, which is typically felt around 16:00 in London on the last trading day of the month, generates signals for all USD/G10 currency pairs, indicating the expected direction and strength of forex flows in end of the month.

Expectations for the US dollar against the yen today:

The general trend of the currency pair, the US dollar against the Japanese yen (USD/JPY), is still bullish and will remain so as long as it is stable above the psychological resistance of 150.00. If the US economic growth numbers and the Federal Reserve’s preferred inflation reading come stronger than expectations, bulls may find the opportunity to move towards the closest resistance levels. 150.85, 151.30 and 152.00 respectively. On the other hand, according to the performance on the daily chart, there will be no initial shift in the general trend to bearish without moving towards the support level of 148.80 again.

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