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Japanese Currency is Under Pressure

8/18/2022 2:11 PM

USD/JPY is showing an uptrend this week, currently trading at 135.30 because the yen is under pressure from weak macroeconomic data.

Exports in July added 19.0% instead of the expected 18.2%, but the volume of Imports also increased by 47.2%, exceeding the projected 45.7%, which led to an increase in the Merchandise Trade Balance Total deficit to 1.4368 trillion yen. Exports grew due to the supply of cars to the United States and China, and Imports increased due to higher prices for oil, coal and gas. Machinery Orders, the main indicator of investment in production, rose by 0.9% in July, partially offsetting the June decline, but fell short of the projected increase of 1.3%. The released data testify to the fragility of the recovery of the national economy and may give the Bank of Japan more arguments in favor of maintaining the current loose monetary policy.

The minutes of the US Federal Reserve meeting published the day before also contributed to the growth of USD/JPY, despite the fact that they did not provide complete clarity on the further actions of the regulator. Officials confirmed that they would continue raising interest rates until inflation began to decline significantly. The calculated "neutral" level for them is the range of 2.25–2.50%. Members of the regulator noted that their actions will be based on economic data, which is the main difficulty for the market. After the meeting of the US Fed, the July data on inflation were published, according to which the indicator slowed down the growth to 8.5%. Whether this will be enough to reduce the pace of interest rate hikes to 50 basis points is not yet clear. Nevertheless, the determination of the Fed's representatives to continue tightening monetary policy further supported the position of the US currency.


The price consolidated above the center line of Bollinger Bands (134.37), which gives the prospect of further growth to the levels of 136.00 (Murray [7/8], Fibonacci retracement 23.6%), 137.50 (Murray [8/8]), 139.06 (Murray [+1/8]). The key level for the "bears" is seen at 132.80 (Murray [5/8], Fibonacci retracement 50.0%). Its breakdown will give the prospect of developing a decline to the levels of 131.25 (Murray [4/8], Fibonacci retracement 61.8%) and 129.68 (Murray [3/8]).

Technical indicators don't provide a single signal: Bollinger Bands are reversing downwards, but Stochastic is reversing upwards and the MACD is decreasing in the negative zone.

Resistance levels: 136.00, 137.50, 139.06. | Support levels: 132.80, 131.25, 129.68.



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