7) USDJPY

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

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

• Resistance: 117.40
• Support: 115.50, 115.00, 114.00

The couple has been very active this week. The movement of the currency pair all week was exclusively up. Thus, the currency pair made a path of almost 240 pips in a week, breaking through multi-year highs, ending the week at the level of January 2017. This became possible thanks to a combination of supporting factors, on the one hand, a slight positive news from the east of Europe, on the other hand, dovish comments from BoJ representatives, as well as a very hot level of inflation in the US. By the end of the week, the market remains in the phase of extreme fear, the value of the Fear-Greed indicator points to 14.

It has been another volatile week in the financial markets and events in and around Ukraine continue to dominate. Market commentators cited a decline in optimism caused by an earlier comment by Russian President Vladimir Putin, who noted positive talks with Ukraine after Ukraine's foreign minister said there was no progress in talks on Thursday. Sentiment remains highly news-driven, and there remains great uncertainty about the outcome of the military crisis between Ukraine and Russia, as well as the impact on the economies of bilateral sanctions.

This, in turn, creates huge uncertainty about the global economic outlook, as soaring commodity prices pose a huge downside risk to growth and higher risk of inflation. Central banks were already between a rock and a hard place even before the start of the military sting operation in Ukraine, as they sought to control inflation without negatively impacting the recovery from the pandemic. They may soon be forced to choose between inflation and recession.

Also, the main risk of the 20s and 21s, COVID, has resurfaced. China reports 1,524 local cases of coronavirus infection, a two-year high. In other words, there is still a risk of disruption to supply chains due to potential mass lockdowns in China. The situation in Hong Kong is completely out of control, and the number of cases on the mainland is rising. China reported 1,524 cases of local infections today, up from 1,100 the day before. This is the highest figure since the first outbreak in Wuhan. The Chinese government has imposed a lockdown on 17 million residents of Shenzhen.

Among the macro data published this week, one of the most important publications was inflation in the US.
US consumer inflation hit a new 40-year high and raised 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 amid a 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.

Against this background, the yield of 10-year Treasury bonds managed to rise above the critical and psychological mark of 2%, but closed on Friday below it at 1.997%. Yields rise when investors sell bonds, which usually happens when their risk appetite increases and they switch to equities. But given that stocks are currently experiencing their worst drop in years, that's not what's happening right now. Rather, investors are now assessing the prospects for higher Fed interest rates, which make the Treasury's current payments on long-term bonds unsatisfactory.

Japan posted a current account deficit of 1.1887 trillion yen this week in January. Which is an anti-record since the beginning of 2014 against the backdrop of a jump in the cost of oil imports. We have also been receiving messages throughout the week from BoJ officials, including BoJ Head of Monetary Affairs Seiichi Shimuzu, and Bank of Japan Governor H. Kuroda, that the Japanese economy has not yet fully recovered from the effects of the pandemic and that there is still a need for continued monetary easing. credit policy. It was also noted that it would be inappropriate to tighten policy even if energy and commodity prices are pushing inflation upwards.

Several central banks will announce their monetary policy decisions next week, including the Fed and the Bank of Japan. If everything is clear with BoJ and no one expects an increase in interest rates from it. On the contrary, the Bank of Japan is expected to keep its main rate -0.1% at the meeting on Friday. Japan's national consumer price index was 0.5% year on year in January and is expected to fall to 0.3% when February data is released on March 17.

Despite the fact that Japan imports almost all of its energy, and prices rose sharply last year, deflation has proven to be an almost intractable problem, and the Bank of Japan is not considering raising interest rates.

As for the Fed, next week, with little doubt, they will start raising interest rates for the first time since 2018. The Fed almost promised a 0.25% hike on March 16th. Markets are undecided on whether the Fed will initiate a $9 trillion cut in the bank's balance sheet. With inflation at record levels and sure to pick up in the coming months, the rollback of maturing bonds will be a strong signal to credit markets that the Fed is serious about fighting inflation. It would be a hawkish shock if the Fed immediately raised interest rates by 0.5%.

In other words, next week the Federal Reserve System and the Bank of Japan will part ways both in practice and in theory, and then the difference in approaches to monetary policy will actually be an abyss.

From a fundamental standpoint, there are a few key developments to keep an eye on next week:

Tuesday:
- US Producer Price Index (PPI) (MoM) (Feb)
Wednesday:
- Core Retail Sales (MoM) (Feb)
- Retail Sales (MoM) (Feb)
- Fed rate decision
- FOMC press conference
Thursday:
- Number of Initial Jobless Claims in the US
Friday:
- National Core Consumer Price Index (CPI) (YoY) (Feb)
- Bank of Japan Interest Rate Decision
- Press conference of the Bank of Japan K

Fundamental forecasts for the currency pair have not changed. The yield of benchmark 10-year US bonds has repeatedly exceeded the psychological level of 2% this year, and this 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.

Against the backdrop, 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, including Japan. In other words, we will observe a more bullish market for the currency pair throughout 2022.