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USDJPY Market Analysis

3/16/2023 11:14 AM

The USD/JPY pair shows a moderate decline, developing the downward momentum formed the day before, and the strengthening of the yen is not hindered by weak macroeconomic statistics from Japan.

Industrial Production in January showed a decline of 3.1% after -2.3% in the previous month, while analysts expected the dynamics to remain at the level of -2.3%. In monthly terms, the decline in the index accelerated from -4.6% to -5.3%, which also turned out to be worse than the analysts' neutral forecasts. At the same time, traders drew attention to the increase in the dynamics of Exports in February by 6.5% after rising by 3.5% in the previous month, while analysts had expected 7.1%. Imports for the same period increased by 8.3%, which, however, turned out to be significantly lower than the dynamics of the previous month at the level of 17.5%, and forecasts assumed an increase of 12.2%. On the back of a notable recovery in Exports, Japan managed to reduce its Trade Deficit in February from -3498.6 billion yen to -897.7 billion yen, which was better than market expectations at -1069.4 billion yen.

The day before, investors assessed the minutes of the meeting of the Bank of Japan, which left the interest rate at -0.10%, continuing the ultra-soft monetary policy. Regulator board members agreed that the national economy continues to recover, and predicted a slowdown in inflation in the second half of the next financial year. In the meantime, according to a survey by the Japan Economic Research Center (JERC), wages at companies will be adjusted upwards, averaging 2.85% in the new fiscal year, to a 25-year peak. However, experts agree that this will not be enough, as Bank of Japan officials have previously stressed that indexing to inflation, which hit a 41-year high of around 4.0%, is needed to keep interest rates low and continue a 200.0 billion dollar economic stimulus program.

On the D1 chart Bollinger Bands are reversing into the descending plane. The price range is expanding from below, but does not conform to the surge of the "bearish" activity yet. MACD is falling, keeping a relatively strong sell signal (the histogram is below the signal line). Stochastic, having shown a rebound from its lows at the beginning of the week, still maintains an upward direction, signaling the possibility of a corrective growth of the instrument 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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