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The USDJPY is Again Testing 135.00 for a Breakout

2/22/2023 10:43 AM

The USD/JPY pair is trading in different directions, again testing the level of 135.00 for a breakout and updating local highs from December 20. The day before the American currency received an impetus to growth, reacting to the publication of the February statistics on business activity indices, which turned out to be better than analysts' forecasts, thereby strengthening investor confidence in the continuation of the "hawkish" course of monetary policy by the US Federal Reserve. During the March meeting, officials can raise the interest rate by 25 basis points, after which it is possible to keep it at current levels for some time.

In turn, the Bank of Japan is expected to take more decisive action in the next few months on the issue of tightening monetary stimulus, as inflation in the country is kept around 4.5%, more than twice the regulator's target level. The most likely candidate for the post of Governor of the regulator, a member of the Bank's Governing Council, Kazuo Ueda, has already announced his readiness to continue the "dovish" course, but investors do not rule out changes in policy from the new head. Earlier, Japanese Prime Minister Fumio Kishida emphasized that financial sector officials need to have strong communication skills and be able to coordinate with colleagues around the world in order to overcome the global crisis.

On Friday, February 24, traders expect the publication of January inflation statistics, where current forecasts suggest an increase in the Consumer Price Index in January from 4.0% to 4.5%, and the CPI excluding Food and Energy may accelerate from 3.0% to 3.2%. In addition, the market's attention will be drawn to Kazuo Ueda's speech in the The House of Councillors of the national parliament, and on February 28, hearings will be held to confirm the candidacies of two deputy heads of the Bank of Japan.

Bollinger Bands on the daily chart show a steady increase. The price range is slightly narrowing, reflecting the ambiguous dynamics of trading in the short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic, having retreated from its highs at the end of last week, remains horizontal and still signals the risks of the American dollar being overbought in the ultra-short term.

Resistance levels: 135.57, 136.50, 137.50, 138.50. | Support levels: 134.50, 133.61, 133.00, 132.00.

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