General analysis USDJPY for 09.05.2022

Current dynamics.

Japan's consumer price index rose 1.9% and average wages rose 1.2% over the year. Japan has almost reached the desired inflation rate of 2%.

Japan's Ministry of Internal Affairs and Communications recorded a Consumer Price Index (CPI) increase of 1.9% in April.  The CPI increased for 8 months in a row and almost reached the 2% target set by Japan's central bank.

The largest increases were in electricity (25.8%), heating (25.6%), gas (27.6%) and kerosene (21.0%). The prices of refrigerators (21.6%) and other durable goods also rose significantly. Average household fees rose by an average of 6.1%. It is worth noting that prices for mobile communication in April decreased by 22.5% while in March it was registered a price decrease by 52.7%.

However, the growth of wages in March on year-on-year terms constituted 1.2%. Against this backdrop, in May three organizations representing small- and medium-sized firms supported the government's decision to increase the minimum wage due to a sharp labor shortage and rising prices. This measure will lead to an increase in costs for companies, but demand will also grow.

It is worth recalling that the Bank of Japan will continue quantitative easing in an effort to achieve a stable inflation target of 2%. Also, recall that the Fed raised the rate by 50 bps to 1% and will cut the balance sheet by $47.5 billion a month from June 1 and by $95 billion in September.

Against this background, we should expect accelerated growth in CPI and wages in Japan in the coming month, which along with the Fed action will continue to put pressure on the Yen.

Tomorrow at 01:30(GMT+2), the Household Spending Index for March will be published. It is expected to decrease by 2.8% in YoY terms and increase by 2.6% in MoM terms.

Later in the day at 14:30(GMT+2), the U.S. Federal Open Market Committee (FOMC) Member Bostic Speaks.

Support and resistance levels.

USD/JPY began consolidation near the key Fibonacci 100 level. The current trend is upward. The RSI oscillator is in the upper half below the 70 level.

• Support levels: 130.65, 130.23, 129.62, 129.09, 128.59, 127.95, 126.93
• Resistance levels: 131.25, 133.90

Trading scenarios

• Long positions can be opened above the level of 131.25 with a target of 133.90 and a stop loss of 129.35: Implementation period: 3-5 days
• Short positions can be opened below the level of 130.23 with a target of 129.62 and stop-loss at 130.65: Implementation period: 2-4 days