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USDJPY Market Update

12/21/2022 2:27 PM

Quotes of USD/JPY are correcting at 132.21. The yen added 4.2% in yesterday's trading, reacting to the results of the Bank of Japan meeting, at which the interest rate was kept at the same level of -0.10%, but the policy of controlling the yield curve of 10-year government bonds was adjusted: previously it was allowed to deviate by 25 basis points either way from the target level of 0.00%, and now changes by 50 basis points become possible.

In addition, the regulator announced a significant increase in the volume of purchases of government bonds in unlimited volumes, expanding the range of purchased instruments: in addition to traditional 10-year bonds, the Bank of Japan now intends to buy assets with more global maturities. Governor Haruhiko Kuroda said he sees the move as an opportunity to stave off the negative effects on the economy from high inflation caused by higher import prices due to the depreciation of the yen. Thus, the Bank of Japan expects that after the appreciation of the national currency, the inflationary impact will begin to decrease.

The impact of the US dollar on the USD/JPY pair was almost not felt yesterday, and the quotes themselves continued their corrective dynamics, trading around 103.700 in the USD Index today. Investors negatively assessed the data on the real estate market, released yesterday. The number of Building Permits decreased by 170.0 thousand, and the Housing Starts, according to data for November, fell by 0.5%, amounting to 1.427 million after 1.434 million in October.

On the daily chart of the asset, the USD/JPY pair is trading in a local downtrend, reaching the support line near the low of August 2.

Technical indicators still hold the sell signal, which has recently intensified: fast EMAs on the Alligator indicator are held below the signal line, and the AO oscillator histogram, trading below the transition level, forms downward bars.

Support levels: 131.50, 127.20. | Resistance levels: 133.50, 137.00.

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