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USDJPY Market Update

10/20/2022 11:43 AM

During the Asian session, the USD/JPY pair is trading ambiguously, getting ready to test the psychological level of 150.00.

A significant gap between the monetary policy pursued by the US Federal Reserve and the Bank of Japan affects the positions of national currencies: the difference in interest rates of 3.00–3.25% in the United States and Japan –0.1% is reflected in the yield of government bonds, and investors give preference to American securities with a level of risk comparable in terms of credit rating, strengthening the position of the dollar. Meanwhile, the US regulator is gearing up for another 75.0 bps rate hike in November. Against this background, the yen reached its lowest level since 1990 – 148.75. On Thursday, Japanese Finance Minister Shunichi Suzuki reaffirmed the willingness officials to continue their policy of intervention against high volatility without any further announcements. Now the Bank of Japan is taking a wait-and-see position, arguing this with poor inflation rates: the agency is concerned about the unilateral weakening of the yen and, in September, already resorted to the mechanism of foreign exchange intervention. It was impossible to change the situation at that time significantly, but now the financial authorities can significantly increase sales.

Macroeconomic statistics from Japan, released on Thursday, provide little support for the yen: export volumes rose by 28.9% in September after rising by 22.0% last month against forecasts of 27.1%. Imports for the same period slowed from 49.9% to 45.9%, slightly higher than the expected growth of 75.0%, and the trade deficit decreased from –2.820B yen to –2.094B yen.

On the daily chart, Bollinger Bands are growing moderately: the price range is expanding, letting the “bulls” new record highs. The MACD indicator is growing, keeping a fairly strong buy signal (the histogram is above the signal line). Stochastic, having reached its highs, reversed into a horizontal plane, indicating that the US dollar may become overbought in the ultra-short term.

Resistance levels: 150.00, 151.00, 152.00, 153.00. | Support levels: 149.00, 148.00, 147.00, 146.00.

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