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Japan will Keep its Policy of Negative Rates

1/25/2023 12:29 PM

Against the recent statement by the Minister of Finance of Japan, Shunichi Suzuki, who noted the deteriorating economic situation in the country, the USD/JPY pair maintains an uncertain momentum, trading at 130.55

The regulator keeps the interest rate at the negative level of –0.10%, which does not allow blocking the growth of inflation, which reached 3.1% from 2.9% earlier. Suzuki said tightening monetary policy could exacerbate the problem, as a 1.00% increase would raise the cost of servicing government debt by 3.7T yen, which could total 32.5T yen. Thus, the Bank of Japan has to choose between a gradual increase in inflation and an increase in the budget deficit.

The quotes of the American currency are held at 101.600 in the USD Index, having practically not reacted to yesterday's data on business activity for January, which exceeded analysts' expectations: Manufacturing PMI rose to 46.8 points, higher than forecasts of 46.0 points, and Service PMI grew to 46.6 points compared to the estimated 45.0 points.

On the daily chart, the trading instrument moves within a local downward corridor, near the resistance line of 130.50.

Technical indicators weaken the sell signal: fast EMAs on the Alligator indicator approach the signal line, indicating a possible correction, and the AO histogram forms upward bars below the transition level.

Resistance levels: 131.63, 135.00. | Support levels: 128.88, 126.31.

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