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USDJPY Market Update

11/3/2022 11:01 AM

The US dollar shows a moderate decline, developing a "bearish" trend formed on Tuesday. The USD/JPY pair is testing 147.25 for a breakdown, weakening amid increased risks of a slowdown in the US Federal Reserve's monetary policy tightening in the future.

The day before, the regulator decided to raise the interest rate by 75 basis points to 4.0%. At the same time, the Chairman of the Fed, Jerome Powell, noted that at the next meetings it will take into account the time delay with which the tightening of policy affects the real economy and inflation. In turn, the US currency was also supported yesterday by the published report from Automatic Data Processing (ADP) on employment in the private sector. In October, Employment Change increased by 239.0 thousand after an increase of 192.0 thousand in the previous month, while analysts expected the dynamics to accelerate only to 195.0 thousand. On Friday, investors will follow the publication of the final report on the US labor market for October. Current forecasts suggest that the Unemployment Rate could rise from 3.5% to 3.6% for the first time in a long time.

In turn, the day before the Bank of Japan published the minutes of the last meeting, which note that the national economy is strengthening, but a weak yen can cause significant damage to households and small businesses. Earlier, the regulator had already adjusted its forecasts for the dynamics of Gross Domestic Product (GDP) this year from 2.4% to 2.0%, and inflation from 2.3% to 2.9%, noting the continuing uncertainty and stressing that the risks for economic activity are skewed downwards, and prices are skewed upwards. In addition, officials intend to continue financing national businesses, maintain stability in financial markets and take additional measures to ease current policies if necessary.

Bollinger Bands in D1 chart demonstrate a weak decrease. The price range is slightly narrowing, staying spacious enough for the current activity level in the market. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic, having rebounded from "80", reversed into a descending plane, signaling in favor of the development of a correctional decline in the ultra-short term.

Resistance levels: 148.27, 149.00, 150.00, 151.00. | Support levels: 147.00, 146.00, 145.00, 144.00.

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