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USDJPY Correction to a Two-month Downtrend

12/6/2022 1:46 PM

The USD/JPY pair started the current week with growth, correcting to a two-month downward trend.

The US currency is strengthening its position against the background of monetary factors and positive macroeconomic statistics. Thus, the US non-manufacturing purchasing managers' index for November from the Institute for Supply Management (ISM) rose from 54.4 points to 56.5 points, which, along with strong labor market data published on Friday, confirms the resilience of the US economy to monetary policy tightening measures taken by the US Fed. Despite the long-term increase in the interest rate, serious incentives for inflation remain. In this regard, the expediency of slowing down the adjustment of the value next week, announced earlier by the regulator's officials, may be questioned, which strengthens the position of the USD against alternative assets.

 In Japan, the October household spending index was published today: on a monthly basis, the indicator fell from 1.8% to 1.1%, and on an annual basis – from 2.3% to 1.2%. In general, the expenses of Japanese citizens have been increasing for the fifth month in a row, which experts attribute to the complete abolition of quarantine restrictions in the country and government subsidies for domestic travel. At the same time, this growth is significantly slowing down due to inflation and a decrease in real wages. Under the influence of these factors, household spending cuts may begin in the near future, which will lead to new pressure on the national economy. Also, the weakening of the yen is now promoted by the comments of Japanese officials. Thus, Finance Minister Shunichi Suzuki said yesterday that the government could take measures to stabilize the exchange rate, since both its sharp weakening and its growth are considered economically harmful.     

Technically, the price is testing the 137.50 mark (Murray [4/8]), however, to reverse the current downward trend, it will need to consolidate above the middle line of the Bollinger Bands at around 139.20. In this case, the price growth will be able to continue to the levels of 143.75 (Murray [6/8]) and 146.87 (Murray [7/8]). The key for the "bears" remains the mark of 134.37 (Murray [3/8]), at the breakdown of which the decline will resume to the levels of 131.25 (Murray [2/8]) and 128.12 (Murray [1/8]).

Technical indicators do not give a single signal: a downward reversal of the Bollinger Bands and stabilization of the MACD histogram in the negative zone point out the continuation of the downward trend, but an upward reversal of the Stochastic does not exclude the beginning of a correction.     

Resistance levels: 139.20, 143.75, 146.87. | Support levels: 134.37, 131.25, 128.12.

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