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USDJPY Market Update

8/2/2022 3:39 PM

This week, the USD/JPY continued its decline and is currently trading at 130.50.

The US dollar remains under pressure amid a deteriorating economic situation in the US, which makes investors turn to the yen as a traditional shelter asset. Economists and politicians are still arguing about whether the two-quarter decline in GDP is a recession, but no one denies serious pressure on the country's economy. According to the latest July data, the ISM Manufacturing PMI fell from 53.0 to 52.8 points, which is better than the expected 52.0 points. However, the general downward trend in the indicator has continued since the beginning of the year, and the value is close to the stagnation zone. On Friday, investors are waiting for the most important data of the week – the July statistics on the labor market publication: increased pressure on this sector, which supports the national economy, may cause further weakening of the US currency.

The yen looks stronger than the dollar, but the Japanese economy is under the negative influence of high inflation and lower global demand, which is illustrated by the latest macroeconomic statistics: July Manufacturing PMI fell from 52.7 points to 52.1 points due to supply disruptions from China and a decrease in the volume of orders for goods. Nevertheless, the prospects for the fall of the American economy are much more alarming for investors than the problems of the Japanese market, which ensures the current decline in the USD/JPY pair.

The price fell below 131.25 (Murrey [4/8], Fibonacci retracement 61.8%), which gives the prospect of further declines to 129.12 (Murrey [3/8]) and 128.12 (Murrey [2/8]). The breakout of 132.81 (Murrey [5/8], Fibonacci retracement 50.0%) allows growth to 134.37 (Murrey [6/8], Fibonacci retracement 38.2%), 135.93 (Murrey [7/8], Fibonacci retracement 23.6%, middle line of Bollinger bands).

The indicators reflect the possibility of further decline: Bollinger bands reverse downwards, the MACD histogram is increasing in the negative zone, and Stochastic has entered the oversold zone.

Resistance levels: 132.81, 134.37, 135.93. | Support levels: 131.25, 129.68, 128.12.

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