7) USDJPY

Technical Analysis (MA, RSI, STOCH, MACD, ADX)

• M30 - DOWN
• H1 - UP
• H4 - UP
• D1 - UP
• W1 - UP
• MN - UP

• Resistance: 115.60, 116.30, 116.70
• Support: 113.40, 112.60, 111.80

Yesterday the currency pair continued its main upward movement, testing the resistance level of 115.50. The broad demand for protection is responsible for the upward direction, as well as a very pronounced preponderance in the demand for the protection dollar. Stock markets continue to experience strong volatility, against which investors continue to go into safe-haven currency, the value of the Fear-Greed indicator points to 33.

The geopolitical plan remains uncertain. The US is calling for an open meeting at the UN Security Council to discuss the current situation with Russia. The Russian Federation does not rule out further negotiations with the United States regarding its security requirements, despite the fact that the written response of the United States does not meet the requirements of the Russian Federation. Russian officials have indicated that the US and Russia are considering a new meeting of the two countries' foreign ministers next week. There have also been reports in the media that official China has urged Russia not to escalate military tensions when the Beijing Winter Olympics are held from next Friday until February 20. Perhaps the participation of China will somehow affect this situation by reducing the intensity.

Angry macro data Japan did not publish anything yesterday. The US yesterday published a number of important data, against which the US dollar maintained its strong growth. The initial publication of the US GDP report showed that the growth of the world's largest economy accelerated to 6.9% year on year during the 4th quarter of 2021. This was well above the consensus estimate of 5.5%. In 2021 as a whole, the economy grew by 5.8% and showed the strongest growth in almost four decades. Separately, initial jobless claims fell to 260,000 last week from 290,000 the previous week. This, to a greater extent, helped to offset weaker data on total unemployment benefits, which were slightly worse than the forecast of 1,675 thousand people, compared to the forecast of 1,650 thousand.

Today, Japan released its core consumer price index (CPI) in Tokyo on an annualized basis for January, which fell to 0.2% from 0.5% in December. Showing the failure of the BoJ in accelerating inflation. BoJ Gov. Haruhiko Kuroda also spoke today commenting on the Fed's hawkish turn as well as a number of comments on the BoJ's plans.
Kuroda said the BoJ does not expect the Fed's policies to have a negative impact on the Japanese economy. It is desirable that exchange rates move steadily, reflecting fundamental factors, he said, adding that the Bank of Japan monitors the yen's exchange rate very closely.
'Tightening US monetary policy has often led to a weakening of the yen, but this is not always the case. Continued massive monetary easing by the Bank of Japan will help boost corporate profits and improve the labor market,' Kuroda added.

Moreover, he commented on some of the BOJ's plans: 'It is still premature to raise the yield plan or take steps to make the yield curve steeper. If inflation at 2% is reached, the BOJ is likely to discuss various options.'
In other words, the BoJ will continue with persistent and powerful monetary easing until further notice. Not that this comes as much of a surprise given that inflation is still far from 2% and may never reach that level. But it clearly shows the potential for further weakening of the Yen exchange rate.

Further, we follow exclusively the development of demand for protection, and the dynamics of prices in the US dollar.

Forecasts for the currency pair have not changed. The 10-year US bond yield recently climbed to 1.902%. The difference between the yields of 10-year US and Japanese bonds is widening, which will continue to be the main upward driver. Plus, do not forget about the policy of the Bank of Japan to control the yield curve, in which the yield on 10-year Japanese government bonds is close to zero.

Interest rate differentials and approaches to monetary policy are back in vogue. One can make a meta-prediction that the US dollar, thanks to the Fed's promise, will be stronger compared to the currencies of countries whose rate prospects are static, such as the Bank of Japan and the European Central Bank. In other words, we will observe a more bullish market for the currency pair throughout 2022.