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USDJPY Long-term Trend is Still Downtrend

1/4/2023 12:12 PM

The day before, the pair USD/JPY updated the June local lows, reaching the level of 129.52; however, closer to the close of the day session, the instrument managed to fully win back the losses.

The positions of the yen are supported by the rhetoric of Japanese Prime Minister Fumio Kishida, who announced his intention to discuss with the management of national companies the issue of raising wages to employees at a level exceeding inflation, which now stands at 3.8% per annum. According to him, the government is preparing to create a structure in which wages will be indexed every year, as this has a significant impact on consumption and stimulates the economy to grow, strengthening, in turn, the position of the national currency. It is worth noting that the official's comments came amid growing public concern over the cost of living crisis and the government's plummeting ratings.

In turn, the Governor of the Bank of Japan, Haruhiko Kuroda, noted today that the regulator will continue the "dovish" course of monetary policy to achieve inflation targets of 2.0%. In his opinion, the Japanese economy will recover strongly and steadily this year, supported by soft monetary conditions, especially after officials announced the expansion of the range of government bond yields around zero from 25 to 50 basis points, and also predicted wage growth against the backdrop of labor shortages and structural changes in the national labor market.

The long-term trend is downward. Today, market participants are trying to break through the support level of 130.90, and if they succeed, the price is likely to continue to decline with the target of 127.90. If the level of 127.90 is broken down, the next sell target will be 124.10.

The mid-term trend is also downtrend. The downside target is the target zone 5 (129.23–128.87), and the trend boundary is shifting to 134.24–133.81. If the price corrects into this area, it will be possible to consider short positions with the first target at the low of the current week at 129.58.

Resistance levels: 134.47, 138.05, 139.50. | Support levels: 130.90, 127.90, 124.10.

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