Current trend

The USD/JPY pair is holding at 142.26, trying to build on Friday's corrective momentum. A week earlier, the instrument showed a steady decline, which was the market’s reaction to the softening of the US Federal Reserve’s position regarding monetary policy. In turn, the Bank of Japan once again demonstrated its readiness to abandon the long cycle of negative interest rates in the event of further strengthening of inflationary pressure in the country. It is likely that if the correction of borrowing costs by the American and Japanese regulators coincides in time in 2024, this could provoke a significant strengthening of the yen’s position. At the moment, analysts do not rule out a decline in the USD/JPY pair to 135.00.

Tomorrow investors will monitor the results of the Bank of Japan meeting. There is little doubt that officials will keep interest rates at -0.10%, but economists participating in a traditional Reuters survey believe that the regulator will end the cycle of ultra-loose monetary policy by the end of next year. This was stated by more than 80.0% of respondents, and some of them (14.0%) predict that changes to the main parameters will be made at the meeting on January 22-23 against the background of an increase in wages by an average of 3.58%, which is the largest increase in about three decades. Also, this week, statistics on foreign trade will be published in Japan: it is expected that Imports in November will decrease by 8.6% after -12.5% a month earlier, and Exports will drop to 1.5% from 1.6%. On Friday, market participants will pay attention to November inflation data: the CPI excluding Fresh Food is expected to slow slightly from 2.9% to 2.5%.

Support and resistance

Bollinger Bands on the daily chart show a steady decline. The price range expands from below, making way for new local lows for the "bears". MACD is going down preserving a stable sell signal (located below the signal line). Stochastic, having approached the level of "20", reversed into a horizontal plane, indicating the risks of oversold US currency in the ultra-short term.

Resistance levels: 142.50, 143.40, 144.00, 145.00.

Support levels: 142.00, 140.94, 140.50, 140.00.

Trading tips

Long positions can be opened after a breakout of 142.50 with the target of 144.00. Stop-loss — 141.70. Implementation time: 1-2 days.

A rebound from 142.50 as from resistance, followed by a breakdown of 142.00 may become a signal for opening of new short positions with the target at 140.50. Stop-loss — 142.80.