USD/JPY Outlook: Positive US Data Points to Additional Fed Hikes

• The market anticipates additional interest rate increases from the Fed.

• Initial jobless claims in the US surprisingly decreased last week.

• Japan’s export growth slowed significantly in January.

Today’s USD/JPY outlook is bullish. The dollar soared on Friday, reaching a six-week high. The market anticipated additional interest rate increases in response to strong economic data from the US.

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According to data released on Thursday, the number of Americans submitting new applications for unemployment benefits surprisingly decreased last week. Other data showed that in January, producer prices rose on a monthly basis at their fastest rate in seven months.

The reports released on Thursday came in the wake of information released earlier this week that showed strong growth in January retail sales in the United States and indications of sticky inflation, igniting concerns that the Federal Reserve would have to raise rates more than initially anticipated.

The dollar surged to a fresh six-week high of 134.69 against the Japanese yen and was set for a weekly gain of about 2.5%, its greatest week since last August.

Because of weaker Chinese demand for automobiles and chip manufacturing equipment, Japan’s export growth slowed significantly in January, fueling worries of a global downturn and leading to the worst trade deficit in the nation’s history.

The demand for Japanese goods has decreased due to aggressive interest rate increases in other major economies. This decline was exacerbated as China celebrated the Lunar New Year in January.

But, the easing of China’s zero-COVID policy in the latter part of last year might help improve the outlook for a world economy on the verge of recession.

USD/JPY key events today

Investors are not expecting significant news releases from Japan or the United States today. Therefore, they will likely keep absorbing yesterday’s data.

USD/JPY technical outlook: Bulls keep making higher highs

The 4-hour chart shows USD/JPY trading well above the 30-SMA and the RSI close to the overbought region, indicating a strong bullish trend. The trend is further confirmed by the series of higher highs and higher lows, with the price respecting the 30-SMA as support.

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The price has just broken above the 134.00 key resistance level, with bulls making a strong bullish candle. This shows that the bullish trend is still strong. The price will likely keep rising to the next resistance level.

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