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USDJPY Market Update

2/1/2023 11:24 AM

The USD/JPY pair is trading with mixed dynamics, holding near 130.20. Market activity remains quite low, as market participants are in no hurry to open new positions ahead of the publication of the US Federal Reserve's interest rate decision.

Today, the US regulator will complete its two-day meeting, which could result in an interest rate hike by 25 basis points to 4.75%. In addition, during the day a block of macroeconomic statistics from the Institute of Supply Management (ISM) on business activity in the manufacturing sector in January is expected to be released. If analysts' forecasts come true, and the US Federal Reserve goes for a further reduction in the pace of monetary tightening, the US currency may come under moderate pressure. In addition, investors will pay attention to the accompanying statement by the Chair of the Fed, Jerome Powell, as well as a summary of forecasts for the near future. Most analysts agree that the US Federal Reserve will also correct the value in March, bringing it to the psychological level of 5.00%, but then most likely it will take a wait-and-see attitude.

In turn, the market is discussing the possibility of further expansion of the marginal spread on the yield of Japanese government bonds. After the resignation of the Governor of the regulator Haruhiko Kuroda, analysts also do not rule out an increase in the interest rate. Today's macroeconomic statistics did not have a significant impact on the dynamics of the yen: the Manufacturing PMI from Jibun Bank in January remained at the same level of 48.9 points, as predicted by analysts.

The Department of Economic and Social Affairs of the United Nations (UN) in the January report predicts that the country's economy will be among the most developed this year. Positive dynamics will be mainly ensured by high domestic demand and the opening of borders for tourists. Japan's Gross Domestic Product (GDP) is projected to increase by 1.5% after 1.6% recorded last year. The indicators continue to be pressured by increased import costs, the correction of domestic demand in the context of inflation, as well as the negative impact on exports of quarantine restrictions in force in China. In addition, the Russian-Ukrainian military conflict has a limited impact on the Japanese economy: in 2020, imports from countries participating in the conflict to Japan amounted to only 1.8% of the total, and exports to them amounted to 1.0%. In December, the government increased the budget by more than 200.0 billion dollars to direct funds to support households and, in particular, subsidies for gas and electricity, as well as containment of fuel prices.

On the D1 chart Bollinger Bands are trying to reverse into the ascending plane. The price range is narrowing from below, reflecting ambiguous dynamics of trading in the short and ultra-short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic resumed active growth after flat dynamics at the end of last week. The indicator is approaching its highs once again, indicating the risks of overbought American dollar in the ultra-short term.

Resistance levels: 131.00, 132.00, 133.00, 133.61. | Support levels: 130.00, 129.00, 128.00, 127.00

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