The USD/JPY pair has been trying to correct upwards for the fourth week in relation to the mid-term downward trend: this week the price reached two-month highs at 132.90, but today it dropped down to the middle line of the Bollinger Bands in the area of 129.80.
The reason for the strengthening of the yen's position was the announcement of the appointment of a member of the board of the regulator Kazuo Ueda as the new governor of the Bank of Japan. This decision of the government came as a surprise to the market, but also gave investors hope for a change in the ultra-"dovish" course of monetary policy. The fact is that most experts believed that Masayoshi Amamiya, who is the deputy of Haruhiko Kuroda, who is leaving in April and traditionally adheres to the current rhetoric of keeping the interest rate at negative levels, would become the new head of the department, so he was not expected to abandon the current incentives. Ueda's views are considered more "hawkish", and he may well move to tighten monetary policy to combat inflation.
The January data on the producer price index released today also supported the upward momentum of the yen: on a monthly basis, the indicator was 0.0% instead of the expected 0.3%, and on an annual basis it decreased from 10.5% to 9.5%. Statistics confirm the weakening of inflationary pressure in the Japanese economy, but the pace of price growth is still significant.
Nevertheless, long-term monetary factors will continue to support the position of the US currency. Currently, investors are assuming the possibility of extending the interest rate adjustment period by the US Fed due to the continued high activity in the labor market. Despite the fact that the latest weekly data turned out to be worse than experts' expectations (the number of initial applications for unemployment benefits amounted to 196.0K, and the number of people receiving assistance from the state increased to 1.68M), the market remains stable, which can become a catalyst for increased inflation. The regulator's officials see a way out of this situation in the continuation of tightening monetary policy, which was confirmed by the head of the US Fed Jerome Powell last week.
Currently, the price is at 131.25 (Murray level [2/8]), waiting for new drivers of movement. With its consolidation above the 132.90 mark, the growth will be able to continue to the level of 137.50 (Murray level [4/8]). The key level for the "bears" is 128.12 (Murray level [1/8]), its breakdown will give the prospect of further decline to the area of 125.00 (Murray level [0/8]), 121.87 (Murray level [-1/8]).
Technical indicators do not give a single signal: the Bollinger Bands are horizontal, the Stochastic is directed downwards, and the MACD histogram is preparing to move into a positive zone.
Resistance levels: 132.90, 137.50, 140.62. | Support levels: 128.12, 125.00, 121.87.