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USDJPY Pressure on the Yen Remains

2/15/2023 1:20 PM

This week, the USD/JPY pair resumed its growth, regaining the positions lost earlier, and is now in the 133.40 area.

Two main factors contributed to the positive dynamics: the publication of January data on US inflation, which was higher than investors' expectations, and a poor report on Japan's Q4 2022 gross domestic product (GDP). The US CPI was 6.4% YoY, down from 6.5% in December but higher than expected at 6.2%, while the core index reached 5.6% instead of 5.5% but was below 5.7% previously. The negative impact on the country's economy is decreasing but more slowly than experts expected, and in these conditions, US Federal Reserve officials are unlikely to suspend the reduction in incentives. It is more likely that monetary tightening will continue in March and May, which will support the US dollar.

The yen is under pressure amid the release of preliminary data on GDP, which was worse than market expectations: the indicator rose only by 0.2% QoQ instead of 0.5% expected and by 0.6% YoY against 2.0%. Experts believe that the poor dynamics may force the Bank of Japan to keep the "dovish" rhetoric and not move on to tighten monetary policy, which many investors expected earlier. Additional pressure on the currency is exerted by the market's disappointment in the figure of the new head of the regulator Kazuo Ueda: analysts assumed that the change in the leadership of the department would lead to the abandonment of monetary incentives in favor of increasing interest rates to fight inflation, however, in one of his first interviews, the official said that the current the bank's actions are adequate to the situation, so there are no quick changes in the course expected.

In the medium term, the trading instrument is trying to reverse the trend upward, actively strengthening. In the case of a breakout of 134.37 (Murrey level [3/8]), the growth targets will be 137.50 (Murrey level [4/8]) and 140.62 (Murrey level [5/8]). The key "bearish" level is the middle line of Bollinger bands around 130.70, the breakdown of which will give the prospect of returning quotes to 128.12 (Murrey level [1/8]) and 125.00 (Murrey level [0/8]).

Technical indicators reflect continued growth: Bollinger bands are directed upwards, Stochastic is increasing but has entered the overbought zone, and the MACD histogram has moved into the positive zone.

Resistance levels: 134.37, 137.50, 140.62. | Support levels: 130.70, 128.12, 125.00.

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