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USDJPY Market Update

12/8/2022 10:35 AM

The US dollar shows moderate growth, trying to build on the "bullish" momentum formed at the beginning of the week, when the USD/JPY pair was holding near local lows from August 15. Demand for the US currency remains quite high, as analysts are increasingly talking about the prospects for a further slowdown in the global economy.

At the same time, the activity of trading in the US dollar is moderately declining ahead of the US Federal Reserve meeting to be held next week. Current forecasts suggest a 50 basis point hike in the interest rate, but investors will also evaluate the regulator's forecasts for 2023. For example, the Bank of Canada, which also increased the rate by 50 basis points the day before, plans to adjust it in 2023, but chose to abandon specific numbers in the accompanying statement.

Insignificant support for the yen is provided by relatively optimistic macroeconomic statistics from Japan. The indicator of Gross Domestic Product (GDP) for the third quarter, according to an updated estimate, showed a decrease of 0.2% in quarterly terms and 0.8% in annual terms, which turned out to be slightly better than the previous values (-0.3% and -1.2% respectively). The volume of Bank Lending in November retained the same growth rate of 2.7%, despite the expected slowdown to 2.5%.

The day before, Bank of Japan board member Toyoaki Nakamura stated the need to maintain the current ultra-soft monetary policy in order to support the national economy after the crisis caused by the COVID-19 pandemic, and also stressed that the current rise in consumer prices is not accompanied by an increase in wages in the country. At the same time, the official predicted a slowdown in inflation, noting that in 2023 the impulse to increase the cost of energy and food products will weaken slightly. In quarterly forecasts made in October, the regulator indicated that core consumer inflation will reach 2.9% in the current fiscal year and then slow down to 1.6%.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is narrowing, reflecting multidirectional dynamics of trading in the short/medium 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: 137.50, 138.50, 139.58, 140.79. | Support levels: 136.50, 135.57, 134.78, 133.61.

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