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Monetary Factors Continue to Strengthen the Position of the Yen

12/29/2022 1:20 PM

The USD/JPY pair is holding within the mid-term downtrend, and in the last two weeks, the main influence on the dynamics is mainly provided by monetary factors.

The price reached five-month lows around 130.55 after the decision of the Bank of Japan to expand the range of allowable movement of yields on 10-year government bonds from 25.0 to 50.0 basis points on both sides of the target level of 0.0%. Investors regarded these actions as the first step towards the transition from the "dovish" course, which led to a serious strengthening of the yen. However, then, the authorities tried to calm the market, and the head of the regulator, Haruhiko Kuroda, said that the latest decisions, on the contrary, were aimed at supporting the current soft policy, which led to the growth of quotations to the area of 134.37 (Murrey's level [3/8]). In turn, the latest review of the opinions of members of the Board of the Bank of Japan confirmed that officials are indeed discussing the possibility of starting a gradual removal of monetary stimulus. Still, market participants are confident that this process will not begin until April, when the current head of the department resigns.

Currently, the price of the USD/JPY pair is again trying to start falling, reacting to the publication of poor US data on pending home sales in the US, which fell by another 4.0% in November, illustrating the weakness of the national real estate market.

Technically, the downtrend remains, but to continue a serious decline, quotes will have to break below 131.25 (Murrey's level [2/8]). In this case, the targets will be 128.12 (Murrey level [1/8]) and 125.00 (Murrey level [0/8]). The key for the "bulls" seems to be the middle line of Bollinger bands around 135.25, consolidation above which will increase the prospects for strengthening the positions of the asset to 137.50 (Murrey level [4/8]), 140.62 (Murrey level [5/8]).

Technical indicators do not give a single signal: Bollinger bands are directed downwards, Stochastic is upward, while the MACD histogram is stable in the negative zone.

Resistance levels: 135.25, 137.50, 140.62. | Support levels: 131.25, 128.12, 125.00.

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