General analysis USDJPY for 25.03.2022

Current Dynamics

Gooshi Kataoka, BoJ member of the Bank's Management Board, said that weaker JPY has positive effect on Japanese economy and the damage from imports due to the national currency weakening will not be big.
Kataoka also said in his speech that inflation could exceed 1.5% due to oil price dynamic but Bank of Japan is ready to take necessary steps if needed. At the same time, Japan's economy has been booming since the coronavirus pandemic. However, the government of Japan, despite the geopolitical risks, introduces a new package of sanctions against Russia. So, from March 25, Japan announced a ban on exports to Russia of luxury goods and expansion of the sanctions for citizens of the Russian Federation and legal entities.
So, from March 25, Japan announced a ban on exports to Russia of luxury goods and expansion of the sanctions list for citizens of the Russian Federation and legal entities.
Yesterday the labor market data was quite positive on the US, starting from the initial claims of 187K compared to the experts' expectations of 212K and the total number of those getting unemployment benefits was 1.350K compared to the market expectations of 1.410K.
However, the underlying index of durable goods orders for February contracted by 0.6%, and total durable goods orders for February contracted by 2.2%. Meanwhile, the manufacturing activity index for March was 58.5 and the service sector activity index for March was 58.9.
Meantime in Japan the PMI of manufacturing activity was 53.2 in March against the experts expectations of 53.5. At the same time the PMI of service sector though showed positive dynamics and was 48.7 in March against 44.2 in February, but still below 50 which points to continuing decreasing of this sector of economy.  Separately, it should be noted the reduction of foreign capital investment in Japanese equities over the last two months. This week, the volume of foreign investments decreased by 631.4B. At the same time the core CPI rose 0.8% YoY in March, while experts predicted only a 0.4% growth.

Today at 16:00 (GMT+2), the U.S. Pending Home Sales Index for February is expected to be released. At 19:00 (GMT +2), the week's data on the number of active U.S. drilling rigs will be released.

Support and resistance levels.

 On the news from Japan this morning, USD/JPY moved into a correction and almost reached the Fibonacci level of 261.8. The market has moved into consolidation above the 121.60 level. The current trend is upward. During the correction, the RSI oscillator dipped below the 70 level.

• Support levels: 120.82, 121.07, 121.60,120.40, 120.00, 119.40, 119.15,118.88, 118.37
• Resistance levels: 122.72

Trading scenarios

• Long positions can be opened from the current level with target 122.72 and stop-loss 121.70 Implementation period: 1-3 days
• Short positions can be opened from below the level of 121.07 with a target of 120.00 and stop-loss 121.60. Implementation period: 1-3 days