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USDJPY Instrument Reverses Downwards

12/30/2022 11:01 AM

The yen returns to the upward trend, striving to end the year with a leading position in the USD/JPY pair and currently trading around 132.53.

The traditional summary of opinions of the members of the Bank of Japan confirmed the need to continue the quantitative and qualitative easing (QQE) of monetary policy until the steps already taken by the regulator affect the dynamics of consumer prices. Also, officials intend to keep the interest rate at a negative level since the first signs of growth in corporate profits and higher wages of employees have begun to appear, indicating the effectiveness of the policy being pursued. These positive results indirectly confirm the latest macroeconomic data, according to which in November, the volume of industrial production in Japan decreased by only 0.1%, which is much better than the correction of –3.2% a month earlier and exceeds the analysts' forecast of -0.3%.

In the meantime, against the backdrop of an increase in the incidence of coronavirus infection in neighboring China, the Japanese authorities decided to tighten border controls for travelers arriving from this country starting today. Now they need to take a test for COVID-19, and in case of a positive result, go to a seven-day quarantine. To ensure thorough testing, the government said it would limit the departure and arrival of direct flights connecting Japan with mainland China, Hong Kong, and Macau.

The impact of the US dollar on the dynamics of the USD/JPY pair continues to be minimal due to the absolute neutrality of the US currency, which has been trading around 103.700 in the USD Index since mid-December. Data on the national labor market, published yesterday, failed to support quotes: initial jobless claims increased to 225.0K from 216.0K a week earlier.

On the daily chart, the USD/JPY pair is trading within a local downtrend, dropping towards the low of the beginning of the month's level of 131.60.

Technical indicators still hold a sell signal, which has recently begun to increase: fast EMAs on the Alligator indicator remain at a significant distance from the signal line, and the AO oscillator histogram, trading below the transition level, continues to form corrective bars.

Support levels: 131.60, 127.20. | Resistance levels: 134.50, 138.10.

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