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USDJPY Market Analysis

1/26/2023 10:44 AM

The USD/JPY shows an uncertain decline, testing the level of 129.30 for a breakdown and developing a downtrend since Tuesday, January 24, when the American dollar held near the local highs from January 18. The current dynamics is largely due to expectations of publication of macroeconomic statistics at the end of the week.

Of greatest interest are the annual data on the dynamics of the US Gross Domestic Product (GDP) for the fourth quarter of 2022, where forecasts suggest a slowdown in the indicator from 3.2% to 2.6%. Also, investors will monitor the dynamics of Durable Goods Orders: in December, they can add 2.5% after falling by 2.1% in the previous month.

In turn, Japan will release January inflation data tomorrow. The Consumer Price Index in the Tokyo region is expected to accelerate to 4.4%, confirming the high probability that the country's main financial regulator will abandon its ultra-loose monetary policy in the near future. Meanwhile, Japan's Finance Minister Shunichi Suzuki said that the state of the national economy continues to deteriorate rapidly amid the escalation of the Russian-Ukrainian military conflict and the consequences of unprecedented spending during the coronavirus pandemic. He said the government will bail out households and businesses that are under pressure from inflation that hit a 41-year high (in December, the figure excluding fresh food added 4.0% year on year). In turn, Prime Minister Fumio Kishida believes that adjusting wages to a level that exceeds consumer price increases, as well as increasing support for families with children and stimulating investment and reforms in areas such as green and digital transformation will be able to change the situation.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is narrowing, reflecting multidirectional nature of trading in the short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). In the last few days, given the prevailing "bearish" influence in the market, the strength of the upside signal has decreased significantly. Stochastic, without reaching the level of "80", reversed into a downward plane, reacting to the decline in the American currency in recent days.

Resistance levels: 130.00, 131.00, 132.00, 133.00. | Support levels: 129.00, 128.00, 127.00, 126.34.

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