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USDJPY Market Update

10/27/2022 12:19 PM

The US dollar is trading with a downtrend, testing the level of 145.70 for a breakdown. The USD/JPY pair is developing the corrective momentum formed on the market on Tuesday and is currently approaching the local lows updated at the beginning of the week.

Investors are actively selling the US currency against the backdrop of the publication of negative macroeconomic statistics from the US. In particular, this week, traders drew attention to a sharp slowdown in Housing Prices with a simultaneous drop in demand due to high mortgage rates: in September, the figure fell from 24.7% to -10.9%. In addition, the market is concerned about a possible aggravation of the situation with prices for gasoline and oil, as the threat of stopping energy supplies from Russia remains. Traders believe that the difficulties in the US economy may prompt the US Federal Reserve to move to a more cautious monetary policy after the planned increase in interest rates by 75 basis points in early November.

In turn, the Bank of Japan will hold its meeting on Friday. As before, investors do not expect any changes in the vector of the regulator's monetary policy, but they are counting on updated forecasts, as well as comments on the prospects for foreign exchange interventions. Statistics on inflation in the Tokyo region for October will also be published tomorrow. Current forecasts suggest an increase in the Consumer Price Index from 2.8% to 3.1%, and the CPI excluding Food and Energy could accelerate from 1.7% to 2.1%.

In the D1 chart, Bollinger Bands are reversing horizontally. The price range is almost unchanged, limiting the development potential of the current corrective decline in the short term. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic keeps a confident downward direction but is rapidly approaching its lows, which indicates the risks of oversold US dollar in the ultra-short term.

Resistance levels: 146.00, 147.00, 148.00, 149.00. | Support levels: 145.00, 144.00, 143.51, 142.54.

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