7) USDJPY

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

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

• Resistance: 114.40, 114.70, 115.40
• Support: 113.20, 113.00, 112.30

The currency pair was multidirectional yesterday and traded in a 70-point range, with a predominantly downward direction. After testing the 113.50 support level, the currency pair rebounded from it. The US dollar continued to decline against the Japanese Yen. Investors continue to be cautious ahead of the decisive FOMC meeting. But the markets are usually optimistic about such meetings. Which led to the growth of US stock indices. The general phase of the market is still in the area of ​​extreme greed. According to the results for yesterday, the value of the Fear-Greed indicator at the maximum for this year is 78.

The actions of the People's Bank of China are having a positive effect on stock markets. As a reminder, the NBK continues to inject increased volumes of liquidity into the banking system. An additional RMB 50 billion injected through reverse repo transactions was reported today.
However, not without fears, COVID remains in the spotlight in China. China's National Health Commission said the latest COVID outbreak was the most common since the Wuhan outbreak. The highly contagious variant of the delta is spreading throughout the country, despite the increasingly aggressive measures that local authorities are taking to try to prevent it. Officials in China say they are committed to maintaining the so-called Covid Zero approach. The energy crisis in the world's second-largest economy is also still here. All of this combined can push the market back into the risk-averse phase.

The US did not publish anything important yesterday. No news was published in Japan. The only thing we want to draw your attention to is the speech of the Minister of Finance of Japan, Shunichi Suzuki, who said after a meeting with the Governor of the Bank of Japan Haruhiko Kuroda that BoJ retains complete independence in deciding on monetary policy. S. Suzuki said that the foreign exchange market and exchange rates were not discussed at this meeting, BoJ will do everything possible to maintain market stability and achieve the target inflation rate. In other words, BoJ will continue its super-soft monetary policy further, and they will print as much money as necessary.

Today Japan is resting, so all attention is paid to the key event of this week.
The Fed is slated to announce its monetary policy decision later during the US session on Wednesday, and many expect it to begin narrowing its $ 120 billion a month asset purchase program. However, investors will be looking for clues to the likely timing of when the US central bank will raise interest rates. Consequently, the focus will be on the post-meeting press conference by Fed Chairman Jerome Powell, which will play a key role in influencing the near-term dynamics of the US dollar.

In the meantime, you can be guided by data on the US economy, including the release of the ADP report on private employment and the ISM service PMI. The data could give some momentum to the currency pair, although the initial reaction is likely to be muted as traders may prefer to wait for a fresh catalyst from the latest FOMC policy update.

Then we wait:
Today:
- 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
Tomorrow:
- 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 background 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 ​​fall 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%. Due to the growing possibility of a downward correction and general volatility for the currency pair, we increase the risks of trading on the currency pair for the next day!

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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