General analysis USDJPY for 20.04.2022

Current Dynamics

Today USD/JPY has renewed multi-year highs. At the moment there is an uptrend correction, but the fundamental data definitely points to further growth in the medium term. The current drop can be explained by a considerable amount of speculative short-term long positions being closed on the renewal of the next price peak. The Yen has lost more than 10% in 2022 and Investizo thinks that the level of 130.000 might be crossed before the end of this week.
The reason for such a long appreciation of the pair is not because of the strength of the dollar but because of the weakness of the Japanese national currency. The BoJ ready buy an unlimited amount of ten-year bonds in order to keep their yield increase at 0.25%. The Japanese regulator continues to move towards a soft monetary policy that in the current situation could lead to several cycles of currency interventions. In this regard the position of the Japanese government looks quite illogical. The head of the regulator, Kuroda said he was concerned about rapid fall of the yen as such dynamics have a negative impact on business activity of commercial companies. However, regulator didn't take any action. Finance Minister Suzuki also said that a weak yen is not good for Japan's economy. Rhetoric of the officials clearly does not match the real activity of the Bank of Japan, so the pair continues to rise in spite of the fact that total position in forex market is formed to sell.
Also worth noting is the growing trade deficit in foreign trade. The main catalyst for the negative balance is the high price of energy. Japan is moving towards releasing strategic oil reserves without setting up new supply chains and reducing its purchases of major petroleum products from Russia.
At the same time, the dollar is showing strength as the market expects a rate hike of 50 basis points at once at the May meeting, as well as the start of a massive balance sheet reduction. It is worth noting that the Fed is planning $96 billion in monthly cuts to get rid of the bloated balance sheet by the end of the third quarter of 2023.
Today at 16:00 (GMT+2), the US will release statistics on secondary housing market sales for March. At 16:30 (GMT+2) the EIA will release its weekly change report for major oil products, which may put additional pressure on the JPY if actual data shows a decline in inventories. Another important macroeconomic event is the release of the US Federal Reserve's "Beige Book" at 20:00 (GMT+2).

Support and resistance levels

On the 4h chart the instrument is consolidating in the upper range of Bollinger Band indicator, which acts as the nearest resistance level. The indicator is directed upwards and the price range is not significantly reduced, indicating an uptrend correction. The MACD histogram is in the positive zone, holding a strong buy signal. Stochastic is approaching the oversold area, a strong buy signal is expected within 1-2 days.

• Support levels: 123.60, 125.50, 126.55, 127,45.
• Resistance levels: 128.35, 129.50, 130.35.

Trading scenarios

• Long positions can be opened at the current price with a target of 130.00 and a stop loss at 126.50. Implementation period: 1-3 days.
• Short positions should be opened below the level of 126.50 with a target of 124.60 and a stop-loss at 127.80. Implementation period: 1-3 days.