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USDJPY Trading Instrument Resumed its Decline

2/2/2023 2:08 PM

This week, the USD/JPY pair resumed its decline and today is testing the 128.12 mark (Murray level [1/8]). The US currency was under pressure against the background of the results of the US Fed meeting that ended earlier.

As expected, the regulator raised the interest rate by 25.0 basis points to the target range of 4.50%-4.75%. The accompanying statement notes that despite the fact that inflation has adjusted somewhat, it remains too high, which indicates a possible continuation of the cycle of tightening monetary policy. The head of the department, Jerome Powell, said that additional evidence would be needed so that officials would be sure that the situation was under control, but for now it was premature to talk about a victory over consumer price growth.  The rhetoric of the representatives of the US Fed disappointed investors who expected to hear hints about the timing of the suspension of the interest rate increase. The continuation of the "hawkish" course may create excessive pressure on the economy, pushing it into recession, especially since the latest statistics already confirm the slowdown. Thus, the January index of business activity in the US manufacturing sector from the Institute for Supply Management (ISM) decreased more than expected – from 48.4 points to 47.4 points. Employment, according to Automatic Data Processing (ADP), increased by 106.0K, which is also much worse than the 178.0K expected by experts. The prospects of further weakening of the US economy are forcing investors to abandon the dollar in favor of alternative assets.

As for the Japanese yen, its positions also do not look stable. A serious increase in inflation, along with the preservation of the Bank of Japan's soft monetary policy and the slowdown in the industrial sector, retains significant prerequisites for the weakening of the economy and the national currency. At the same time, the market is more interested in the situation in the USA, which allows the yen to continue strengthening.

The level of 128.12 (Murray level [1/8]) remains key for the "bears", its breakdown will give the prospect of a decline to 125.00 (Murray level [0/8]) and 121.87 (Murray level [-1/8]). If the price consolidates above the middle line of the Bollinger Bands and the mark of 131.25 (Murray level [2/8]), it will be possible for growth to resume to the area of 134.37 (Murray level [3/8]) and 137.50 (Murray level [4/8]), but for now this option of movement seems less likely, since technical indicators point out the continuation of the downward trend: the Bollinger Bands and the Stochastic are directed downwards, the MACD histogram is stable in the negative zone.

Resistance levels: 131.25, 134.37, 137.50. | Support levels: 128.12, 125.00, 121.87.

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