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Waiting for the Japanese Consumer Inflation Data

3/20/2023 11:02 AM

The USD/JPY pair is slightly strengthening, trying to recover from last Friday's decline, which led to the renewal of local lows from February 14. The instrument is testing the level of 132.00 for a breakout; however, the activity of the "bulls" remains quite low.

On Wednesday, March 22, the US Federal Reserve's interest rate decision will be published, which could set the tone for trading for the next few weeks. It is expected that the rate will be increased by only 25 basis points, while a scenario with an increase of 50 basis points at once was not excluded. There is also the possibility that the regulator will take a wait-and-see attitude, but this would be at odds with recent statements by the Chairman of the Fed, Jerome Powell, who emphasized that the fight against inflation is far from over.

At the end of the week, traders in Japan will follow the February statistics on inflation. Current forecasts suggest that the Consumer Price Index will slow down from 4.3% to 4.1%, while the Core CPI excluding Food and Energy will accelerate from 3.2% to 3.4%. In turn, National CPI excluding Fresh Food is likely to be 3.1%, well below the 4.2% in January, as government subsidies for gas and electricity mitigate the sharp increase in the cost of living for households. Also on Friday, Japan is expected to release statistics on business activity indexes: the Manufacturing PMI from Jibun Bank may be adjusted from 47.7 points to 47.5 points.

Bollinger Bands in D1 chart demonstrate active decrease. The price range expands from below, making way for new local lows for the "bears". MACD is falling, keeping a relatively strong sell signal (the histogram is below the signal line). Stochastic retains a steady downtrend but is located in close proximity to its lows, which indicates the risks of oversold American dollar in the ultra-short term.

Resistance levels: 133.00, 134.00, 134.54, 135.57. | Support levels: 132.00, 131.00, 130.00, 129.39.

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