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USDJPY Market Update

2/23/2023 1:36 PM

The USD/JPY pair has been growing since mid-January, and this week the price reached three-month highs around 135.20.

The dollar was strengthened by the data from the minutes of the last meeting of the US Fed, according to which officials are ready to continue raising the interest rate and at the same time can increase the amount of adjustment from 25.0 basis points to 50.0 basis points. This decision is due to the too weak rate of reduction of inflationary pressure in the American economy and the good state of the labor market, which creates conditions for further price growth. The continuation of the cycle of tightening monetary policy in the USA will provide further support to the dollar against other competitors.

At the same time, the Bank of Japan holds opposite views and has no plans to reduce incentives, even despite a serious increase in inflation in the country. Earlier, Naoki Tamura, a member of the regulator's board, said that in the future the bank will have to conduct a comprehensive assessment of its ultra-soft monetary policy, weighing all its advantages and costs, but there is no need to change it yet. Tamura also said that inflation may exceed initial forecasts due to rising prices for services and a large number of companies shifting their costs to households. On Friday, investors also expect the publication of January data on the consumer price index in Japan, which promises to demonstrate an upward trend again. Thus, the total indicator on an annualized basis may increase from 4.0% to 4.2%, and the base indicator – from 4.0% to 4.1%. With prices rising and the Bank of Japan maintaining economic incentives, the yen is likely to continue to remain under pressure.

The price has risen above the level of 134.37 (Murray level [6/8]), which gives the prospect of further growth to the levels of 135.93 (Murray level [7/8]) and 137.50 (Murray level [8/8]). The key for the "bears" is the middle line of the Bollinger Bands in the area of 132.12, if it is broken down, the price will be able to return to the area of 129.68 (Murray level [3/8]) and 128.12 (Murray level [2/8]), however, this movement option seems less likely, since technical indicators point out the continuation of the upward trend: the Bollinger Bands are directed upwards, the MACD histogram increases in the positive zone, and the Stochastic is horizontal near the overbought zone.

Resistance levels: 135.93, 137.50. | Support levels: 132.12, 129.68, 128.12.

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