7) USDJPY

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

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

• Resistance: 112.00, 112.20, 113.00
• Support: 110.25, 109.20, 108.70

The currency pair continued active growth yesterday after rebounding from the level of 110.80 and reaching the level of 111.70. This growth is due to a combination of several factors. The widening difference in yields on US and Japanese government bonds was the key factor that put strong pressure on the Japanese yen. US bond yields have resumed growth, which has continued since late September, when the Fed made it clear that in November it will begin to reduce monthly bond purchases under the QE program.

In fact, the benchmark yield on 10-year US government bonds hit their highest level in more than three months. On the other hand, the yield on Japan's 10-year government bonds remained close to zero due to the Bank of Japan's yield control policy. Meanwhile, expectations of a faster, rising inflation fueled speculation about a Fed rate hike in 2022. This, in turn, helped to restore demand for the US dollar, which was seen as another factor that provided additional upward momentum.
However, it remains to be seen if the bulls can capitalize on this move or choose to take some gains ahead of Friday's main monthly US employment report this week. Therefore, any subsequent positive move is more likely to face tough resistance around 112.00.

From the news, Japan hasn't published anything. Bank of Japan Governor H. Kuroda said yesterday that the rise in the Japanese economy was driven by exports and the manufacturing sector, while strong growth in the US supported the growth of economies around the world, including Japan. He also added that if Japan can improve public health and economy through vaccination certificates, the recovery in the service sector will be more visible.
In the US, however, a fairly negative trade balance for August was published, which showed a wider than expected deficit of $ 73.3 billion. On the other hand, the official ISM Service PMI rose to 61.9 in September, much better than the 60 expected.

Today in Asia we are witnessing sales in the Japanese stock market. The Nikkei 225 collapsed, most likely undergoing a buy-on-rumor, sell-on-fact strategy, previously the Nikkei grew on expectations of new generous incentives from new prime minister Kishida. It has now become known that the new prime minister, Kishida, is advocating greater wealth distribution through a capital tax increase and reforms that will raise wages by addressing the problem of 'temporary workers' when companies are hiring employees on temporary contracts and part-time jobs. and they are paid significantly less than if they were earning full time. Against this background, the Nikkei 225 index has now completely leveled off its significant growth achieved after the resignation of former Prime Minister Sugi.

Next, we look forward to the release of the ADP's Private Sector Employment Report, which will be released at a later date during the early North American session. This, along with the yield on US bonds, should affect the dynamics of the dollar exchange rate and give some momentum.
Tomorrow we are waiting for weekly data on the number of Initial Jobless Claims
Friday:
- Nonfarm Payrolls (Sep) - USD
- US Unemployment Rate (Sep) - USD

The general fundamental background for the currency pair has not changed yet, the upward direction is still basic.
We perceive the downward movement as more corrective and believe that the downward movement will be severely limited. Now the currency pair is close to the level of confirmation of the beginning of the downward correction, 111.00 = 38.2% Fibo from the last upward impulse. The area where the steam can fall is 110.60 - 110.25. Even in the event of a breakdown of the 61.8% Fibo level, the currency pair is unlikely to be able to overcome the support level 108.00 in the near future, which was insurmountable many times.

The important thing is that the Fed is very much ahead of the Bank of Japan in terms of normalizing monetary policy. Ultimately, this divergence between central banks could allow US yields to rise faster than their Japanese counterpart, allowing the dollar to rally against the Yen.

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