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Japanese Economy Remains under Pressure

3/14/2023 11:41 PM

The USD/JPY pair shows moderate growth, approaching 134.00 again. The instrument is recovering after a three-day "bearish" rally, the result of which was the renewal of local lows on February 14. The pressure on the positions of the American currency intensified after the announcement of the closure of two US banks, Silicon Valley Bank and Signature Bank, by the federal authorities. In this regard, the US Department of the Treasury announced the creation of the Bank Term Funding Program (BTFP), which is designed to prevent a repeat of the events of the 2008 financial crisis. The current situation, however, is aggravated by high inflation in the country, to combat which the US Federal Reserve is actively raising interest rates.

At the end of March, the next meeting of the American regulator is expected, at which the indicator can be increased by 25 basis points. Previously, experts did not exclude the possibility of an increase in value by 50 basis points, but now, given the growing anxiety in the financial sector, this seems unlikely. Moreover, the risks of a scenario that does not imply any changes in the cost of borrowing have increased.

The situation in the Japanese economy remains difficult. Even though inflation hit a 41-year high of 4.0% in December, doubling the Bank of Japan's target, and the country's public debt stood at 1.0 quadrillion yen, or 266% of Gross Domestic Product (GDP) in the first month of the year , the regulator intends to maintain an ultra-soft monetary policy and, in particular, to keep the interest rate in the negative zone in order to prevent the economy from going into deflation. In addition, the Bank of Japan takes the position that price growth is not sustainable as it is expected that inflationary pressure will ease at the end of this year. However, data released the day before by the Japan Center for Economic Research reflected estimates that the country's GDP will contract seasonally by 0.6% in January compared to December, the biggest decline since last August. Experts note that if the current trend continues, then in the first quarter, the Japanese economy will lose 3.4% year on year.

On Thursday, March 16, Japan will release February data on the dynamics of Imports and Exports, as well as January statistics on Industrial Production. Forecasts suggest contraction of the indicator by 0.4% in monthly terms and by 2.0% in annual terms.

On the D1 chart Bollinger Bands are moderately reversing into the descending plane. The price range is expanding from below, but it fails to keep pace with the "bearish" activity of recent days. MACD is falling, keeping a relatively strong sell signal (the histogram is below the signal line). In addition, the indicator tests the zero level for a breakdown. Stochastic, having approached its lows, has reversed upwards, signaling in favor of the development of corrective growth in the near future.

Resistance levels: 134.00, 134.54, 135.57, 136.50. | Support levels: 133.00, 132.00, 131.00, 130.00.

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