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USDJPY Market Update

9/1/2022 12:01 PM

The US dollar shows a noticeable increase, updating record highs over the past 24 years, in anticipation of the US Federal Reserve's meeting on monetary policy.

The Fed's Chair Jerome Powell, speaking at a symposium in Jackson Hole, confirmed his readiness to continue the fight against high inflation through a sharp increase in borrowing costs. Thus, investors have revised their forecasts and now expect a third consecutive rate hike of 75 basis points in September. At the moment, this probability is estimated at about 74%. Against this background, the yield of US government securities also continues to grow: 10-year Treasury bonds rose to the level of 3.198% after reaching 3.132% in the last session.

According to statistics released in Japan yesterday, Industrial Production added 1.0% in July, and Retail Sales gained 2.4% against the forecast of 1.9%. Thus, consumer demand is recovering, while inflation remains quite high, reaching 2.6% in annual terms. Junko Nakagawa, Bank of Japan board member for monetary policy, warned earlier that a further increase in the cost of living could negatively impact household spending, stressing the need to maintain an ultra-loose monetary policy and hoping for a return to target levels of 2-3%.

Insignificant support for the Japanese currency today is provided by relatively optimistic macroeconomic statistics. Jibun Bank Manufacturing PMI in August rose from 51.0 to 51.5 points, which turned out to be better than market forecasts.

Bollinger Bands in D1 chart show active growth. The price range is narrowed from below, being spacious enough for the current activity level in the market. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having reached its highs, reversed into the horizontal plane, indicating overbought USD in the ultra-short term.

Resistance levels: 139.67, 140.50, 141.50, 142.50. | Support levels: 138.50, 137.50, 136.50, 135.57.

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