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Slowing Inflation in the USA Pushes the USDJPY Down

12/14/2022 2:43 PM

This week, the USD/JPY pair is declining and is currently trading around 135.40.

The US currency came under pressure after the publication of macroeconomic data in the USA, which confirmed a serious slowdown in consumer price growth: on a monthly basis, the indicator increased by 0.1% instead of the expected 0.3%, and on an annual basis – by 7.1% instead of 7.3%. Core consumer inflation increased by only 0.2% on a monthly basis instead of 0.3%, and by 6.0% on an annual basis instead of 6.1%. The release of these statistics convinced investors that the policy of the US Fed has begun to yield results, gradually weakening the economy and slowing down price growth, so the regulator will switch to a less drastic tightening of monetary policy. Market participants expect that officials will raise the interest rate today not by 75.0 basis percentage points, but only by 50.0 basis percentage points, bringing it to 4.50%. Moreover, it is likely that at the beginning of next year the rate of adjustment of the value will slow down to 25.0 basis percentage points, and the full cycle of interest rate growth may end in March.  

On the other hand, the yen receives support against the background of the release of statistics on the sentiment indices of Japan's largest enterprises from Tankan in the fourth quarter of this year: the indicator for the manufacturing sector decreased from 8.0 points to 7.0 points, which turned out to be better than the 6.0 points expected by experts, and for the service sector – increased from 14.0 points to 19.0 points, exceeding the forecast 17.0 points. In general, the Japanese economy remains stable: industry is under pressure due to increased inflation, declining orders and the global economic crisis, and the non-manufacturing sector continues to strengthen due to the recovery of domestic demand after the lifting of coronavirus restrictions and the growth of tourist flows.

Technically, the price is close to the level of 134.37 (Murray level [3/8]), the breakdown of which will give the prospect of further decline to the mark of 131.25 (Murray level [2/8]). The key for the "bulls" is the level of 137.50 (Murray level [4/8]), supported by the middle line of the Bollinger Bands, if quotes consolidate above it, growth will be able to resume to the area of 140.62 (Murray level [5/8]), 143.75 (Murray level [6/8]), however, this option of movement is seen as a less likely scenario, since technical indicators point out the continuation of the downward trend: the Bollinger Bands and the Stochastic are reversing downwards, the MACD histogram is stable in the negative zone.

Resistance levels: 137.50, 140.62, 143.75. | Support levels: 134.37, 131.25, 128.12.

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