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: 114.00, 113.40, 112.52

The currency pair yesterday continued the growth started the day before, by the end of the day the level of 115.50 was overcome, among other drivers of growth, the main one is the risk impulse, which became a headwind for the safe Yen. Although this impulse is only a slight glimmer of optimism in the current geopolitical picture. The market is still in a state of extreme fear, with the Fear-Greed indicator reading at 13.

The impulse for demand for risky assets came after news agencies reported that Ukraine would no longer seek NATO membership. Ukrainian President Volodymyr Zelenskyy has pointed to some signs of a stabilization in the situation after confirming the withdrawal of his application to join NATO. Ukraine has confirmed the first humanitarian corridor after the Russian Ministry of Defense announced a silence regime for the opening of humanitarian corridors in 5 cities of Ukraine. The next round of peace talks is scheduled for next Thursday in Turkey.

Despite the improvement in market sentiment, fears of stagflation due to the steady rise in oil prices and the rapid growth of global inflation continue to keep investors on their toes, so the demand for protection is supported. Recall that yesterday US President D. Biden issued a decree banning US imports of Russian fossil fuels and investments in the Russian energy sector. The ban applies immediately to new orders and allows existing contracts to be completed within the next 45 days. Last year, Russian oil accounted for 3% of US oil imports.
The UK has also announced a phase-out of Russian oil by the end of 2022. The UK also plans to reduce its dependence on Russian gas.

The S&P 500 is back to its January lows, as is the Nasdaq 100, although on the positive side we are seeing decent gains in the energy sector, both renewables and fossil fuels. US yields rose on concerns about continued inflation risk, with little sign that the observed rise in commodity prices is slowing down.

In terms of data, the US released trade balance data for January. The US trade deficit rose to a record high of -89.70 billion US dollars in January, much worse than the previous level.
On the other hand, Japan posted a record current account deficit of 1.1887 trillion yen yesterday. Which is an anti-record since the beginning of 2014 against the backdrop of a jump in the cost of oil imports. Today, the quarterly GDP was published according to the Cabinet of Ministers, it amounted to 1.1%, which is lower than the forecast and the previous publication, while the annual GDP fell sharply to 4.6%.

Also today, Bank of Japan Governor H. Kuroda said that Japan's economy has not yet fully recovered from the impact of the pandemic, and reaffirmed the need for continued monetary easing.
Seiichi Shimuzu, head of BoJ's monetary relations department, said today that consumer inflation in the country is likely to accelerate strongly due to rising energy and raw material costs due to geopolitics and sanctions.

Further, the main attention will continue to be riveted to the Russian-Ukrainian crisis. Japan further publishes nothing important. We are also following important macro data for the US tomorrow:
- US Consumer Price Index (CPI) YoY (Feb)
- The number of initial claims for unemployment benefits in the United States

Now it is difficult to assess the movement in the context of the fundamental picture for the currency pair, because. the active phase of risk aversion leads to a serious demand for protection. Both currencies are traditional safe-haven currency, which makes them more popular, but the US dollar is under pressure from falling Treasury yields. So the currency pair, most likely, will hang in some balance for a period of geopolitical uncertainty, perhaps even with a slight downward slope, but after the situation stabilizes, the upward movement will continue.

Fundamental forecasts for the currency pair have not changed. The yield of benchmark 10-year US bonds in tight terms approached 2%, which leads to an increase in the difference between the yields of 10-year US and Japanese bonds, which continues to be the main upward driver. Plus, let's not forget the BOJ's yield curve control policy, where the yield on 10-year Japanese government bonds is close to zero, the BoJ recently once again confirmed its commitment to this policy. Also, recent data on inflation in Japan showed that it is still not growing, which confirms the words of the head of the BoJ about the inability to even talk about tightening monetary policy in the coming years.

Amid all this, a meta-prediction can be made that the US dollar, thanks to the Fed's promise, will be stronger compared to the currencies of countries whose rate prospects are static, including Japan. In other words, we will observe a more bullish market for the currency pair throughout 2022.