USD/JPY breaks above 139.50 driven by higher US yields, awaiting Powell

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  • USD/JPY rises to its highest level in a week and remains above 139.50.
  • US yields rise on US economic data including Q3 GDP and ADP employment.
  • Fed Chairman Powell will speak later Wednesday at the Brookings Institution.

The USD/JPY goes up on Wednesday before a speech by Federal Reserve (Fed) Chairman Jerome Powell. Following the release of several US economic reports, US yields moved higher, supporting the pair which is hovering around daily highs at 139.70, the strongest level in a week.

Overall, the US data was mixed and had an unclear impact on the dollar. Measured by the DXY, it falls 0.05%. The Japanese yen is among the worst performers of the day.

US economic data: mixed numbers

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The report released by Automatic Data Processing (ADP) on Wednesday showed US private sector employment rose by 127,000 in November, below the market consensus of 200,000. It was the lowest reading since January 2021.

The US Bureau of Economic Analysis revealed that the US economy grew at an annual rate of 2.9% in the third quarter, above the previous estimate of 2.6%. The price indicators were revised upwards with the GDP deflator from 4.2% to 4.3%.

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Other US economic reports showed the Chicago PMI fell from 45.2 to 37.2 in November, against expectations for a modest increase. Pending home sales fell 4.6%, slightly less than expected.

In general, the numbers were mixed, which supports the idea that the labor market continues to slow down. On Thursday, the key report will be the Core Personal Consumption Expenditure Price Index. On Friday it will be the turn of the official employment report that includes non-farm payrolls and the unemployment rate.

Fed Chairman Jerome Powell will deliver key remarks today

Fed Chairman Jerome Powell will deliver a speech at 18:30 GMT at the Brooking Institution on “Fiscal and Monetary Policy on the Outlook for the Economy, Inflation, and the Changing Labor Market.” After his intervention, Powell will be interviewed by David Wessel, director of the Hutchins Center, and will accept questions.

Market participants will look to Powell’s comments for clues as to whether the Fed will slow down its rate hikes. Following the latest inflation readings, expectations of a 50 basis point rate hike at the December meeting rose. Also the economic outlook presented by the Fed Chairman will be relevant to price action.

Rising yields weigh on the yen

The Japanese yen is one of the worst performing currencies on Wednesday, due to rising bond yields. The 10-year US bond yield stands at 3.79%, the highest level since November 23. The yield on German 10-year bonds rises to 1.96%. At the same time, the dollar is gaining momentum thanks to movements in the bond market.

The yen gets no help from deteriorating market sentiment. The Dow Jones fell 0.55% and the S&P 0.22%. The Nasdaq gains 0.31%.

USD/JPY Outlook

USD/JPY is breaking a key resistance level seen around 139.50. If the dollar manages to consolidate above this level, it is expected to go higher, with a potential target at the resistance zone near 141.00.

A pullback below 139.50 would suggest a continuation of the current consolidation. On the downside, critical support is at 138.50. A daily close below would deteriorate the dollar’s outlook, suggesting a test of the November low at 137.52.

USD/JPY daily chart

USDJPY

USD/JPY

Overview
Last price today 139.29
Today I change daily 0.50
Today’s daily change in % 0.36
today’s daily opening 138.79
Trends
daily SMA20 141.91
daily SMA50 144.58
daily SMA100 141.21
daily SMA200 134.2
levels
previous daily high 139.35
previous daily low 137.87
Previous Weekly High 142.25
previous weekly low 138.05
Previous Monthly High 151.94
Previous monthly minimum 143.53
Daily Fibonacci of 38.2%. 138.43
Daily Fibonacci of 61.8% 138.79
Daily Pivot Point S1 137.99
Daily Pivot Point S2 137.18
Daily Pivot Point S3 136.5
Daily Pivot Point R1 139.47
Daily Pivot Point R2 140.16
Daily Pivot Point R3 140.96

Source: Fx Street

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