7) USDJPY

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

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

• Resistance: 123.80, 125.00, 125.85
• Support: 121.20, 120.50, 119.40

Yesterday, the currency pair was growing for the fifth day in a row, reaching a weekly high of 124.00, where it continues to trade for quite a long period of time. There are many reasons for this move, including the hawkish FOMC protocol, the demand for protection, and the controversial comments from current and former BoJ officials. The Fed's hawkish outlook, along with the recent surge in commodity prices, weighed on investor sentiment, as evidenced by the prevailing cautious market sentiment. The market is likely to gradually return to the phase of risk aversion, the value of the Fear-Greed indicator is now 48.

The currency pair's move is the result of deteriorating market sentiment centered on Western sanctions against Russia amid a military sting operation in Ukraine. The US expanded its actions against Moscow, hitting Russia's Sberbank and Alfa Bank and banning US companies from investing in the country. In the meantime, the EU supported the coal embargo, although it did not officially confirm it. Also yesterday, members of the UN Human Rights Council voted to terminate the status of an associate member of Russia.

Market sentiment is likely to continue to deteriorate amid expectations of an escalation of the Ukrainian crisis after Russia ceases to be a member of the UN Human Rights Council. The isolation of Russia by other members of the UN Human Rights Council may reduce expectations for a diplomatic solution to the conflict.

In terms of data, the number of Americans who filed new jobless claims was released in the US, falling by 5,000 to 166,000 in the week ended April 2, returning to levels not seen since 1968. The numbers came in well below market expectations of 200,000, another sign of labor market tightness and robust labor demand. The Department of Labor has revised the methodology used for seasonal adjustment of national initial requirements and ongoing requirements to reflect the change in model scoring. On a seasonally adjusted basis, initial claims decreased by 3,674 from the previous week to 193,137. The 4-week moving average, which removes weekly volatility, was 170,000, down 8,000 from the previous week's revised average.

Japan did not publish anything yesterday, however we would like to point out some differences in the views and words of the current and former members of the BoJ. Bank of Japan board member Asahi Noguchi said yesterday that the BoJ should maintain its ultra-easy monetary policy, despite the fact that rising fuel prices are expected to lead to higher consumer inflation. On top of that, Japan's central bank has repeatedly said that it remains ready to use powerful tools to avoid an excessive rise in long-term interest rates. Also today, the BoJ was supposed to buy back JGB again in order to reduce their profitability, adhering to the profitability control rule.

Markets were surprised by an interview with Hideo Hayakawa, former governor of the Bank of Japan, who said today that the Japanese central bank is ready to adjust monetary policy settings as early as July amid a weaker yen. Although the Bank of Japan has repeatedly said that a weak yen is good for the overall economy, the impact is close to 50/50 and household discomfort will increase as inflation rises in Japan as well. It's too naive for the Bank of Japan to say that a weak yen is a good thing when the government takes action to deal with rising prices and capping gasoline prices, Hayakawa added.

The markets did not seem to expect such a statement, which led to a sharp rise in the yen, but since the beginning of the European session, the currency pair has won back this fall. This is not the first unofficial comment that indicates that the BoJ may still go for some tightening of monetary policy this year. While we are watching.

Then we follow the end of the week, we are also unlikely to see any aggressive rates. Traders will continue to be guided by developments in the Russia-Ukraine saga, which should continue to play a key role in shaping the overall risk sentiment of Market players.

The classic indicator of the value of a currency is central bank interest rates. This assessment of the strength of the currency, decisively benefited the US dollar. The huge difference in inflation between Japan and the US, and the necessary policy action, could see the yield curve spread between US Treasuries and JGB widen by 100-150 basis points by the end of the year. Plus, don't forget about the Bank of Japan's policy of yield curve control, in which the yield on 10-year Japanese government bonds (JGB) is close to zero, BoJ once again confirmed its commitment to this policy by conducting bond buying operations.

Japan's economy has lagged and slowed significantly for years, and this gap with the US will continue and widen whether both countries or the world as a whole find themselves in an inflation-and-deficit-driven recession this year. The energy price shock currently affecting the global economy will hit Japan harder, as almost all of its energy is imported. While the US is itself a net exporter.

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.

Technically, usually after the breakdown of an important level, the currency pair goes sideways, and then there is profit taking and easy shifting of assets and a review of prospects. However, to say now that the bulls have lost the initiative is very reckless. The maximum that we can see now is some correction, to the area between the levels of 119.40 - 118.50, and then there should be a fundamental driver in the form of an escalation of the conflict, or the hawkish position of the BoJ representatives, or the dovish disappointment of the Fed. Until then, the direction is up.