Economic analysts at Credit Suisse believe that the USD/JPY is likely to suffer a further corrective pullback to the 38.2 percent regression of the October surge, which is now at 113.08/00. However, with a strong foundation in place, they continue to perceive any weaknesses as merely remedial. Support continues to be noted at 113.41/39, followed by 113.08/00.
There is a high probability of a somewhat larger corrective setback. A close below 113.41/39 would indicate a drop to 113.42/21, with the 38.2 percent retracement of the October advance at 113.08/00 acting as a support level in the near term. Should weakness continue to spread, they predicted that support would be found at 112.23 and then, more importantly, at 112.08/00 soon.
Although a further corrective setback can be avoided while 113.41/39 holds, a break above 114.21/31 is required to relieve the strain on this support to take a new look at 114.73/92-the high of November 2017 and the 78.6 percent retracement of the December 2016/March 2020 slide. Following the formation of a big base above the 112.40 high of 2019, the experts expect an eventual break above 114.73/92 in due course, allowing for a move towards 115.51 first, and then the protracted decline from April 1990 at 117.00/10 in the long run.
Review Of The Technical And Fundamental Details
USD/JPY CHART Source: Tradingview.com
The USD/JPY remained weak coming into the European session, trading towards the lower limit of its intraday price band, near 113.00. On Thursday, the duo battled to profit on the former day’s late bounce from 113.40-35, or around two-week lows. The worse trade tone around Asian equities markets benefited the relatively secure Japanese Yen, which was down for the second day.
The Bank of Japan (BoJ) cut its forecasts for actual GDP development and consumer prices for the next fiscal. In its last quarterly report, the Bank of Japan anticipated a development of 3.4% for the year ending March 2022, down from 3.8% previously, and cut its inflation projection to 0% from 0.6%. Markets expect the Bank of Japan to maintain ultra-loose fiscal stimulus while trailing other major monetary authorities in reducing post-crisis support. Nonetheless, the Bank of Japan raised its long-term growth forecast for the fiscal year ending March 2023 from 2.7 percent to 2.9 percent.
With policy easing in mind, the USD/JPY pair responded little to the BoJ’s statement and Governor Haruhiko Kuroda’s post-meeting news conference comments. The minor rise in US Treasury yields helped limit further losses despite a weaker USD and before Thursday’s big event/data worries. The ECB published its monetary policy position later in the mid-European session. Aside from that, the official US Q3 GDP data should re-energize the USD/JPY pair. Traders may also look to US bond yields and overall market risk perception.