7) USDJPY

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

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

• Resistance: 114.30, 114.70, 115.40
• Support: 113.20, 113.00, 112.30

The currency pair was multidirectional yesterday and traded in a narrow range, with a predominantly downward direction. The currency pair, after testing the resistance level of 114.40, fell down. The downward movement started yesterday is still continuing. The US dollar fell yesterday against most of its major competitors yesterday, but its bullish potential remains unchanged. Market participants were cautiously optimistic, pushing global stocks higher. This led the market into a phase of extreme greed, which served as a tailwind for the currency pair. According to the total for yesterday, the value of the Fear-Greed indicator at the maximum for this year is 77.

However, the demand for risky assets is likely to decrease, as there are a number of fears in the market, and the US stock market is 'threatened' by uncertainty about the additional stimulus proposed by US President Joe Biden, despite the recent optimism of the Democratic leader. Also, do not forget that there are still many fears in the market that may continue to support the demand for safe-haven currency. Here is the FOMC meeting, and as it has become customary for China. Only now, a potential food crisis has been added to the problems with COVID. The Chinese government has appealed to the public, urging them to stock up on food in case new lockdowns are introduced.
On the other hand, the Chinese government has begun to urge restaurants and catering companies to use food rationally.
The 2025 plan follows President Xi Jinping's call to reduce food waste and improve the country's food security. Efforts are being made as Chinese agricultural purchases continue to climb year over year to record levels. China is also facing sharp increases in the prices of some foodstuffs, which could be a more serious inflation problem.

The US yesterday released mixed data on IHS Markit Manufacturing PMI for October 2021 and was revised down to 58.4 from 59.2 and 60.7 projections a month earlier. And the ISM figure fell to 60.8 in October from 61.1 in the previous month, but slightly above market expectations of 60.5.

It's worth noting that cautious sentiment ahead of a key US central bank meeting appears to be challenging the currency pair lately. On Monday, the US PMI fell, indicating less urgency on the part of the Fed to cut monthly bond purchases. In addition, as a reference to the recent need to soften the Fed's actions were the reduction of inflationary expectations in the US and the comments of US Treasury Secretary Janet Yellen, who said that she was not confident that the US economy could 'overheat.' Former Fed Chairwoman D. Yellen hinted that the US-China Phase I trade deal and mutual tariff easing could reduce inflation. The same underlines the optimism about a long-awaited trade agreement between the world's two leading economies.

Japan did not publish anything significant yesterday. Japan today released the minutes of the Bank of Japan meeting held last week. As usual, Japan's economy will improve as the impact of the pandemic eases, and BoJ continues to closely monitor the impact of the coronavirus. The negative impact of semiconductor shortages and supply chain disruptions on major manufacturers in Japan was also noted. Also today it became known that the ruling coalition retained the majority in the lower house of the Japanese parliament, in other words, the elections were held as expected. The LDP took the majority.

Next, we follow the news exclusively from the United States, and do not forget that Japan is resting tomorrow.
Tomorrow:
- Change in the number of employed in the non-agricultural sector from ADP (Oct)
- FOMC Statement
- Decision on the Fed's interest rate
- FOMC press conference
Thursday:
- Number of applications for unemployment benefits
Friday:
- Change in the number of people employed in the US nonfarm sector NFP
- US Unemployment Rate (Oct)

The general fundamental background for the currency pair has not changed yet, the upward direction is still basic. The yield on Japan's 10-year government bonds remained close to zero due to the Bank of Japan's policy of controlling the yield curve.
However, now, against the backdrop of a potential exacerbation of the situation with COVID in China, it is very possible that we will see a downward correction, but no more. While the potential area of ​​falling within the framework of the downward technical correction, if such begins, we can mark it as an area between the levels of 113.00 = 50.0% or 112.54 = 61.8%.

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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