03.05.202212:00 Forex-elemzések és áttekintések: Technical analysis and forecast for USD/JPY on May 3, 2022

Since yesterday we did not have time to consider another major currency pair USD /JPY, we will do it today, and start with the results of the recently ended month of April. As you know, judging by the title of this article, it will be of a pronounced technical nature. However, given the most important event of this week, which tomorrow will be the decision of the US Federal Reserve System (FRS) on the main interest rate, a few words about this event, so expected by the market. Again, I have to remind you that market expectations regarding the tightening of the Fed's monetary policy are so high that, it would seem, there is simply nowhere higher. Naturally, such expectations are already more embedded in the price of the US dollar, so if the Fed and Jerome Powell personally disappoint the markets, I'm afraid the US currency is in for a lot of trouble.

In case of insufficient tightening of monetary policy and (or) less hawkish rhetoric of Fed Chairman Powell, the old market rule may work - buy on expectations, sell on facts. By the way, we have already seen something similar with you recently, when the Fed made the first rate increase by 25 basis points after COVID-19. Even then, it seemed to the market to be an insufficient measure. It's no secret that many major bidders expect the Fed's May meeting to raise the rate by 75 bps at once, but the consensus forecast provides for an increase in the federal funds rate by only 50 basis points. At the same time, it is simply necessary to take into account the tone of Jerome Powell's speech at the final press conference. As for the Bank of Japan, it has traditionally taken a clearly "dovish" position in its monetary policy. It is this difference that has recently been the main driver for the growth of the US dollar paired with the Japanese yen.

Monthly

As can be seen at the oldest time interval, last month the USD/JPY pair showed more than impressive growth, as a result of which the pair reached peaks 20 years ago near 131.00. However, there is a limit to everything, and such round and important psychological levels, which is 130.00 in this situation, most often from the first attempts do not breakthrough. This is exactly what we are seeing at the moment of trading, which is being conducted just near this landmark level. And the closing of April at 130.00 at the level of 129.76 demonstrates that the players on the course increase have problems with passing the 130.00 mark. At the beginning of this month, the bulls on the instrument tried to resume the rise of the quote but came across resistance from sellers, which runs at a strong technical level of 130.50. I assume that a lot will be decided for USD/JPY tomorrow evening after the announcement of the rate decision and the press conference of the head of the Fed. In the meantime, purely technically, looking at the monthly chart, there is every reason to expect further growth in the quote. However, before that, there may be a correction to the previous very strong growth.

Weekly

But the closing of the last week of April trading does not look so unambiguous, as indicated by the almost equidistant and rather long shadows of the last candle. In my personal opinion, we should not rule out a corrective pullback towards the level of 127.00, where the minimum trading values of last week were shown. If this happens, and candle signals for opening purchases begin to appear at smaller time intervals, I think it's worth taking advantage of this. That's all for now. One of these days we will return to the consideration of this trading instrument and try to more clearly identify the trading recommendations for USD/JPY.