Published on May 22, 2023

Daily Analysis For USD/JPY 22-05-2023

USD/JPY Analysis

Economic Events and Scenario for USD/JPY

Economic Events: -

GMT	Event	Impact	Currency
00:50	(Japan) Machinery Orders YoY	Medium	JPY
00:50	(Japan) Machinery Orders MoM	Medium	JPY
01:00	(Canada) Victoria Day	None	CAD
01:00	(Montenegro) Independence Day	None	EUR
02:15	(China) Loan Prime Rate 1Y	Medium	CNY
02:15	(China) Loan Prime Rate 5Y	Medium	CNY
05:30	(Netherlands) Consumer Confidence	Medium	EUR
06:00	(Estonia) PPI YoY	Low	EUR
06:00	(Estonia) PPI MoM	Low	EUR
07:30	(Switzerland) Industrial Production YoY	Medium	CHF
08:00	(Slovakia) Current Account	Low	EUR
09:00	(Greece) Current Account	Low	EUR
09:00	(Australia) Myfxbook AUDUSD Sentiment	Medium	AUD
09:00	(Switzerland) Myfxbook USDCHF Sentiment	Medium	CHF
09:00	(Japan) Myfxbook USDJPY Sentiment	Medium	JPY
09:00	(European Union) Myfxbook EURUSD Sentiment	Medium	EUR
09:00	(United Kingdom) Myfxbook GBPUSD Sentiment	Medium	GBP
09:00	(Canada) Myfxbook USDCAD Sentiment	Medium	CAD
09:00	(New Zealand) Myfxbook NZDUSD Sentiment	Medium	NZD
10:00	(Belgium) Consumer Confidence	Low	EUR
10:00	(Euro Area) Construction Output YoY	Low	EUR
10:45	(European Union) EU Bond Auction	Low	EUR
11:00	(Ireland) Wholesale Prices MoM	Low	EUR
11:00	(Ireland) Wholesale Prices YoY	Low	EUR
11:00	(Luxembourg) Unemployment Rate	Low	EUR
11:30	(Portugal) Current Account	Low	EUR
13:00	(Kosovo) Balance of Trade	Low	EUR
13:30	(United States) Fed Bullard Speech	Medium	USD
14:00	(France) 3-Month BTF Auction	Low	EUR
14:00	(France) 12-Month BTF Auction	Low	EUR
14:00	(France) 6-Month BTF Auction	Low	EUR
15:00	(Euro Area) Consumer Confidence	Medium	EUR
15:50	(United States) Fed Barkin Speech	Medium	USD
15:50	(United States) Fed Bostic Speech	Medium	USD
16:30	(United States) 3-Month Bill Auction	Low	USD
16:30	(United States) 6-Month Bill Auction	Low	USD
20:00	(El Salvador) Balance of Trade	Low	USD

Today's Scenario: - During the Asian session, the USD/JPY pair has retraced towards the critical support level of 137.50. Given the delay in raising the US debt ceiling, which has caused turmoil in global markets, it is anticipated that the pair will experience further losses below this support level.

Although S&P 500 futures have recovered some of the earlier losses seen in Asian trading, the overall market sentiment remains risk-averse due to the increasing likelihood of a US Treasury default. US President Joe Biden has rejected the current bipartisan agreement with House of Representatives Kevin McCarthy, deeming it unacceptable. Furthermore, Biden has proposed measures to prevent Democrats from winning re-elections in 2024.

Buy Scenario: - On the upside, if a recovery occurs, USD/JPY may target the recent swing high near 138.75 initially.

However, prior to that, the 50% Fibonacci retracement level of the pair's downturn from October 2022 to January 2023, close to 139.60, would pose a challenge for short-term buyers. This is followed by the late November 2022 peak around 139.90 and the psychological level of 140.00.

If USD/JPY bulls maintain control beyond 140.00, there could be a potential upward trajectory towards the 61.8% Fibonacci retracement level near 142.50. Till we did not advise to buy in USD/JPY.

Sell Scenario: - USD/JPY is currently hovering near the 137.70-60 range, testing a long-standing support line that previously acted as resistance. This comes after a reversal from the highest levels seen since late November 2022.

It is important to note that the bullish signals from the MACD indicator align with the aforementioned resistance-turned-support line, which dates back to mid-December 2022, approximately around 137.65. This presents a challenge for USD/JPY bears.

Even if the pair closes below 137.65 on a daily basis, there are potential barriers to further downside. The 200-day moving average (DMA) level around 137.10, followed by the round figure of 137.00, could limit further declines.

In the event that USD/JPY drops below 137.00, there is a possibility of a decline towards the early April swing high around 135.15. Beyond that, the two-month ascending support line near 134.55 could serve as the final defense for USD/JPY buyers. Till we did not advise to sell the position in USD/JPY.

Support and Resistance Level: -