7) USDJPY

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

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

• Resistance: 116.30, 116.70
• Support: 115.50, 115.00, 114.00

The currency pair yesterday continued its ascent, which began last Friday, breaking only about 30 pips up yesterday. And today, during the Asian session, amid the dovish statements of BoJ, the currency pair began to test the level of 117.00. The upward movement is supported by increased inflationary risks and the extremely dovish position of the BoJ. BoJ policies are in conflict with global central banks by supporting easy money policies. Concerns about the worsening situation in Ukraine continued to weigh on investor sentiment, as evidenced by the prevailing cautious mood in the financial markets, as well as the risks of global inflation are back in the spotlight, the value of the Fear-Greed indicator continues to remain in the area of ​​​​extreme fear, and points to 15.

A sense of optimism reigned in risk-sensitive assets after Ukrainian President Volodymyr Zelensky said he had withdrawn his application to join NATO. After that, the focus was on peace talks between Russian Foreign Minister Sergey Lavrov and his Ukrainian counterpart Dmitry Kuleba, which failed miserably due to the lack of progress on the ceasefire and Ukraine's unwillingness to give in to Russian demands. 'At the moment, Russia is not in a position to establish a ceasefire. They are seeking surrender from Ukraine. They will not get this,' D. Kuleba said after a meeting with Lavrov. This indicates that the cessation of Russian military activity in Ukraine is far from complete, and the improvement in investor risk appetite that has been observed may soon disappear.

International sanctions against Russia prompted Foreign Minister S. Lavrov to declare that Russia will never again depend on the West, which further exacerbates the crisis. According to the latest data, Russia has approved a list of goods and equipment whose exports are temporarily banned in response to Western sanctions imposed in connection with its military special operation in Ukraine. In addition, US President Joe Biden is set to call for an end to normal trade relations with Russia, which will be announced later today, along with the leaders of the G7 and the European Union. These events provoked massive risk aversion in the financial market, causing a new rise in safe-haven currency.

US consumer inflation hit a new 40-year high yesterday, raising fears that higher prices could start destroying demand. In fact, the US headline consumer price index accelerated to 7.9% year-on-year in February and further fueled fears of a major inflationary shock on the back of the recent monstrous rise in commodity prices. This, in turn, raised bets that the Fed's tightening cycle will soon begin in March and pushed US Treasury yields higher. On top of that, a new wave of risk-averse global traders has strengthened the safe-haven US dollar.

Also yesterday, the number of Americans who filed new jobless claims was released, which increased by 11,000 to 227,000 in the week ended March 5, from a revised 216,000 in the previous period and compared to market expectations of 217,000. The seasonally adjusted number is up 22025 from the previous week to 218072, with notable increases recorded in New York (+16255), California (+6233) and Kentucky (+3134).

The Federal Reserve will meet next week and there is no doubt that they will start raising interest rates for the first time since 2018. While slowing growth also poses a risk to the US, as the world's largest oil producer, it is far less vulnerable to Russian sanctions than Europe. The household savings rate is also at an all-time high, and this financial cushion eases the 'pain' of rising prices for Americans.

Not only the US Federal Reserve (Fed), but other major central banks such as the Bank of Canada (BoC) and the Bank of England (BoE) have also been hawkish of late as inflation fears mount due to geopolitical conflicts between Ukraine and Russia. However, the Bank of Japan is not among them. Numerous statements by BoJ Governor H. Kuroda and other members of the Bank of Japan confirm their continued commitment to their ultra-soft monetary policy. Reuters news agency today released a statement from an anonymous BOJ official saying that Japan's economic and price conditions do not allow for easing of stimulus and the BOJ will patiently continue easing monetary policy in order to sustain inflation.

Those. The Bank of Japan intends to stay on the sidelines and maintain a dovish stance on monetary policy, which will continue to put strong pressure on the yen. Which is also one of the goals pursued by the BoJ by conducting direct foreign exchange interventions, reducing its exchange rate. Recently, the yen has risen in price quite strongly, which was not included in the plans of the central bank of Japan. The Bank of Japan will hold a meeting on monetary policy next week, we will closely monitor the rhetoric.

Let's look at the end of the week. Now it is difficult to assess the movement in the context of the fundamental picture for the currency pair, because. while the market is driven by geopolitics. In other words, fundamentally, the currency pair should just fly up, but another negative news comes from the East of Europe, and financial flows rush into the safe Yen and US Treasury bonds, which leads to a sharp fall. However, if the situation stabilizes, the currency pair will definitely move up.

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.