General analysis USDJPY for 20.05.2022

Current Dynamics

Japan's inflation exceeded the 2% target for the first time in 7 years. In Japan, payments to wholesale petroleum product traders increased to 36.1 yen per liter. Core machinery orders increased by 7.1%.

According to government data Japan National Core Consumer Price Index YoY grew on 2.1% in April. The value was the highest and for the first time above the Bank of Japan's 2% target since 2015. It is expected that the Bank of Japan will consider this growth in inflation as a temporary one, due to a significant impact of higher prices for oil and other resources that Japan buys. In particular, gasoline prices in Japan are up 15.7%, kerosene prices are up 26.1%, and the average energy source is up 19.1%.

At the same time the Japanese Ministry of Industry is increasing the payments to wholesale traders of petroleum products from 35 yen to 36.1 yen per liter in order to lower the price on gasoline. Because of this subsidy, the Japanese government is managing to lower gasoline prices for the fifth week in a row.

Also, it became known the date of the third (and last) tender for the release of 15 million barrels of oil from the strategic reserves of Japan as part of a deal with the International Energy Agency. The tender will be held on June 10, 2022, it will offer 4.72 million barrels of oil with delivery from July 20 to September 30.

Also in April, the Core Index of Machine Orders increased by 7.1%.

These numbers suggest that the Bank of Japan's actions to keep monetary policy accommodative are starting to pay off. A weaker yen makes Japanese machine building and industry more attractive and payments to petroleum wholesalers keep domestic gasoline prices in check.

Support and resistance levels.

USD/JPY is at just above the key 23.6 Fibonacci level. The RSI oscillator has rebounded from the 30 level and moving toward the 50 level.

• Support levels: 127.97, 126.94
• Resistance levels: 131.25, 130.23, 129.60, 129.10, 128.60

Trading scenarios

• Long positions can be opened above the 128.60 level with a target of 129.60 and a stop loss of 127.97 Realization period: 1-3 days
• Short positions may be opened below the level of 127.97 with the target of 126.94 and stop-loss 128.60 Period of implementation: 1-3 days