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USDJPY Retreats from Local Lows

12/15/2022 11:14 AM

The US dollar shows weak growth, retreating from the local lows of December 5, updated the day before. The instrument is supported by the results of the two-day meeting of the US Federal Reserve, following which the interest rate was increased by 50 basis points. The regulator slowed down the pace of tightening monetary policy in response to a reduction in consumer inflation, and also fearing a sharper slowdown in the national economy. The Consumer Price Index corrected in November from 7.7% to 7.1% in annual terms, which was better than market forecasts at 7.3%, and in monthly terms the indicator added only 0.1% after rising by 0.4% in October.

Macroeconomic statistics released today in Japan is providing little support to the yen. Export volumes in November added 20.0% after rising by 25.3% in the previous month, while Imports slowed down from 53.5% to 30.3%, which helped to reduce the Trade Balance deficit from -2166.2 billion Japanese yen to -2027.4 billion Japanese yen. The Services PMI in October rose by 0.2% after falling by 0.4% a month earlier, while analysts' forecasts assumed an acceleration of the index to 0.4%. In addition, statistics on sentiment indices of Japan's largest enterprises Tankan in the fourth quarter were published the day before: the indicator for the manufacturing sector decreased from 8.0 points to 7.0 points, which turned out to be better than the 6.0 points expected by experts, and the value for the service sector increased from 14.0 points to 19.0 points, exceeding the projected 17.0 points. The industry remains under pressure due to rising inflation, lower orders and the global economic crisis, while the non-manufacturing sector is strengthening due to the recovery of domestic demand after the lifting of coronavirus restrictions and the increase in tourist flows. The diffuse index of business expectations of Japan's leading industrial corporations fell to 6.0 points from 9.0 points in the third quarter, and remained at 11.0 points for non-manufacturing companies. Tankan continues its downward trend for four consecutive quarters, confirming the opinion of market participants that the business environment in the country is becoming less favorable. This is also evidenced by the survey data of the Bank of Japan: large enterprises plan to increase the volume of investments by 19.2% until March 2023, while three months ago this value was around 21.5%.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is narrowing from below, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is declining keeping a weak sell signal (located below the signal line). Stochastic shows a more confident decline, quickly approaching its lows, indicating the risks of oversold US dollar in the ultra-short term.

Resistance levels: 135.57, 136.50, 137.50, 138.50. | Support levels: 134.50, 133.61, 133.00, 132.00.

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