7) USDJPY

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

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

• Resistance: 113.80, 114.30, 115.40
• Support: 112.30, 111.70, 111.20

The currency pair continued its upward momentum yesterday, after the breakdown of the round level of 113.00, the pair hovered slightly and is still near it. The main drivers of growth, the general weakness of the Japanese Yen, as well as increased demand for safe-heaven currencies. The value of the Fear-Greed indicator decreased to 32 as a result of yesterday.

Alarming news is coming to the market again from China, which increases the demand for protective assets.
Chinese developer Evergrande missed the third consecutive bond payment in recent weeks, which increased the risk of a repeat default. In addition, the Chinese developer Modern Land announced the postponement of payments for three months, and the construction company Sinic Holdings warned of a possible default next week. Also, do not forget about the situation with another Chinese giant Fantasia Holdings Group. According to Bank of America, approximately 40% of Chinese construction companies that borrowed from foreign investors are at risk of bankruptcy. The fact is that in recent years, Chinese developers have not focused on demand, but have been more engaged in speculation. It is clear that in the event of their default, the whole world will feel the negative consequences, of course not as harshly as in 2008 with Lehman Brothers.
On the other hand, the news and analysis of the merged secret Chinese papers are often flashing in the media now. China is preparing for a possible large-scale outbreak of COVID-19, this is stated in government documents that fell into the hands of Epoch Times journalists. According to leaked internal documents obtained by the Chinese Epoch Times, the Chinese government has notified local authorities of the need to prepare for a large-scale COVID-19 outbreak.

On the other hand, concerns about faster-than-expected inflation growth and a slowdown in the global economic recovery reinforce concerns about stagflation.
All this is likely to lead to additional demand for protection, including the demand for JPY. Since the second half of yesterday, we have been noting a decline in the Nikkei 225 stock index.

In terms of news, neither Japan nor the United States published anything important yesterday and today and do not plan to. In Japan, the whole week is quite empty in terms of macro data.
Tomorrow we are following important publications on the USA:
- US Core CPI (MoM) (Sep)
- FOMC Meeting Minutes

A very short-term estimate indicates an easy possibility of a downward movement to the area of 112.30-112.00 against the background of an increase in demand for protection. This option is supported by the expectation of large investors of inflation data in the United States. The pair can take advantage of this and make a technical correction.

The overall fundamental background for the pair has not changed yet, the upward direction is still the main one.
We perceive the downward movement as more corrective and believe that the downward movement will be severely limited.
It is important that the Fed is very much ahead of the Bank of Japan in terms of monetary policy normalization. Ultimately, this divergence between central banks could allow US yields to rise faster than the Japanese counterpart, allowing the dollar to rise against the Yen.

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