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USDJPY Correction After Reaching March Highs

3/30/2023 10:27 AM

The USD/JPY pair shows a slight decline, correcting after a noticeable increase the day before, which brought the instrument to new local highs of March 22. Investors are again inclined to buy American currency amid some improvement in market sentiment, because, despite the anxiety associated with the development of the banking crisis, they hope for the effectiveness of the measures taken by the US Federal Reserve and the Treasury Department to support the financial system.

The yen, in turn, has noticeably weakened due to the approaching end of the fiscal year in Japan, which runs from April 1 to March 31. Bank of Japan Deputy Governor Shinichi Uchida said on Wednesday that the regulator's monetary policy adjustment to control bond yields could be triggered if economic and price conditions justify a gradual phasing out of stimulus. The official noted that inflationary dynamics is critical in assessing the achievement of the Bank of Japan's 2.0% target, but the regulator will consider various macroeconomic data when setting monetary policy. Now, in line with yield curve control (YCC), the Bank of Japan sets short-term rates at -0.1% and 10-year bond yields around 0.0%. In April, Kazuo Ueda will be appointed as the new Governor of the regulator, from whom traders expect decisive steps in the issue of tightening monetary incentives. However, earlier Ueda has already spoken out in favor of continuing the "dovish" course of his predecessor Haruhiko Kuroda, given that consumer prices in Japan have not been fixed at high levels.

Tomorrow investors will follow the block of macroeconomic statistics in Japan. March data will be released on the dynamics of consumer inflation, as well as on industrial production and retail sales for February. Forecasts suggest a slowdown in Tokyo Consumer Price Index in March from 3.4% to 2.7%, while Core CPI may accelerate from 3.2% to 3.3%.

In the D1 chart, Bollinger Bands are reversing horizontally. The price range is narrowing, reflecting 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 keeps its upward direction but is rapidly approaching its highs, which reflects the risks of overbought American dollar in the ultra-short term.

Resistance levels: 133.00, 134.00, 134.54, 135.57. | Support levels: 132.00, 131.00, 130.00, 129.62.

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