General analysis USDJPY for 03.05.2022

Current Dynamics

Half of Japan’s largest energy companies reported losses. The volume of industrial production in Japan has increased in the last year. The weak yen is good for the Japanese economy said the Governor of the Bank of Japan. Tokyo has decided to spend 1,511 billion yen from its fiscal 2022 budget reserve funds on measures as part of a recently adopted a comprehensive package of emergency measures to combat rising prices.

Five of Japan’s top 10 energy companies reported net losses for the fiscal year, which ends in March. It is worth noting that fuel cost increases are not reflected in Japan’s tariffs immediately, but several months later. Along with the price hikes, Tohoku Electric Power Co. had to shut down several power plants in the Fukushima Prefecture due to earthquakes, which resulted in the second biggest net loss in the company’s history at 108.4 billion yen. The remaining five companies that did not record a net loss reported declining profits.

According to a survey conducted in April by Teikoku Databank research center, 66.3% of companies reported increasing of costs, mainly increase prices for fuel. It is worth noting that 46.9% of companies plan to transfer the increase in costs for materials and raw materials to the price of their final product.

However, according to the Ministry of Economy of Japan, the volume of industrial production in Japan in fiscal year 2021 increased by 5.8%. At the same time, Toyota Motors produced 5.4% fewer cars in the last fiscal year (April 2021 to March 2022). Also worth noting is that domestic sales totaled 1.395 million cars, or 9.3% less than in 2020. However, the company’s worldwide sales amounted to 9.51 million vehicles, or 4.7% more than in fiscal year 2020.

Meanwhile, after a two-day meeting at the Bank of Japan, Governor Kuroda Haruhiko said he will not change his view that the weak yen is good for the Japanese economy. In the meantime, Tokyo has decided to spend 1,511 billion yen from general reserve funds in the fiscal year 2022 budget on measures as part of the recently adopted a comprehensive package of emergency measures to combat rising prices. Of the money from the general reserve funds, 277.4 billion yen will be for subsidies for May to be paid to oil wholesalers to help curb gasoline and other fuel prices.

Of the funds from the coronavirus reserves, 800 billion yen will be put up to expand a program giving subsidies to local governments as resources for aid to needy people, while 204.3 billion yen will be spent for an initiative to provide low-income child-rearing families with 50,000 yen in cash benefits per kid and 100 billion yen as subsidies to help small companies.

A three-day weekend begins in Japan.

This week all investors’ attention is focused on the Fed’s interest rate decision to be published tomorrow at 20:00 (GMT+2) and the press conference that begins at 20:30 (GMT+2). Experts forecast an interest rate increase by 50 bps to 1%.

Support and resistance levels.

USD/JPY quotes moved to consolidation in a wide range, above the key Fibonacci level of 100. The current trend is rising. The RSI oscillator is in the upper half after dropping below the 70 level.

• Support levels: 129.35, 128.35, 127.70, 127.20, 126.70, 126.10, 125.05
• Resistance levels: 132.00, 130.25

Trading scenarios

• Long positions can be opened above the level of 130.25 with a target of 132.00 and a stop loss of 129.35: Implementation period: 1-3 days
• Short positions can be opened below the level of 129.35 with a target of 127.70 and a stop loss of 130.25: Implementation period: 1-3 days