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Gold

Wave Analysis

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On the daily chart, the fifth wave of the higher level (5) develops, within which the first entry wave 1 of (5) formed, a correctional wave 2 of (5) developed, and the wave 3 of (5) formed. Now, the first wave of the lower level i of 3 is developing, within which a local correction has ended as the wave (iv) of i. If the assumption is correct, the pair will grow within the wave (v) of i to the levels of 1919.90–2067.60. In this scenario, critical stop loss level is 1752.82.

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GBPUSD

Correction, but Growth may Resume

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Current trend
The GBP/USD pair is confidently recovering its positions, adjusting to the mid-term downward trend. During the week, the price tested the 1.355 level, but could not break through it, as the US currency received support after the release of positive employment data and the publication of the minutes of the last meeting of the US Fed. According to the document, the regulator can start raising the interest rate much faster than previously planned, since the national labor market is close to full employment, and the inflation growth is protracted (the December employment indicator from ADP increased from 505K to 807K).

Nevertheless, the downward correction in the asset may be temporary, since the pound quotes are supported by the decision of the British authorities to abandon strict quarantine measures against the background of another wave of coronavirus in the country. During the week, British Prime Minister Boris Johnson once again stated that the current restrictions are sufficient to overcome the consequences of the pandemic, however, it already has a short-term negative effect on the economy.

Thus, according to Springboard analysts, the number of customers in British stores decreased by 18.6% in December, as citizens minimized contacts, fearing to become infected with the new Omicron strain, and many of them were forced to work from home. As a result, sales volume, which usually grows before the New Year holidays, may decrease significantly, which, in turn, will slow down the recovery of the national economy. It also should be noted that in December, the index of business activity in the UK services sector decreased from 58.5 to 53.6, which was less than 53.2 expected by the market.

Support and resistance
The key level for the “bulls” remains of 1.355, Fibo retracement 38.2%. Fixing above it will give the prospect of growth to 1.3672,(Fibo retracement 50.0%) and 1.3794 (Fibo retracement 61.8%). It will be possible to talk about a serious decline in quotes in case of a breakdown of 1.3428(Fibo retracement of 23.6%) and the middle line of the Bollinger Bands with targets at 1.3306 and 1.3184.
The upward movement of the Bollinger Bands and the growth of the MACD histogram in the positive zone indicate the continuation of the upward trend, but the downward reversal of the Stochastic does not exclude the continuation of the decline.

Resistance levels: 1.3550, 1.3672, 1.3794.
Support levels: 1.3428, 1.3306, 1.3184.

USDCAD

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Current trend
The USD/CAD pair continues to trade within a wide ascending channel. In the middle of last month, the price reached the area of 1.2939, but could not break through higher and began to decline.

Currently, the instrument is testing 1.2695, (Fibo retracement 23.6%), the breakdown of which will allow the quotes to decline to the levels of 1.2575 (Fibo retracement 38.2%) and 1.2480 (the lower limit of the ascending channel, Fibo retracement 50.0%). The level of 1.2939 is still the key one for the "bulls". In case of its breakout, the growth will be able to continue to the levels of 1.3062 and 1.3184 (the upper line of the ascending channel).

In general, the mid-term uptrend in the asset remains, but technical indicators do not exclude a correction within its framework: Stochastic is trying to reverse down, the MACD histogram is preparing to move into the negative zone and form a sell signal.
Support and resistance

Resistance levels: 1.2939, 1.3062, 1.3184.
Support levels: 1.2695, 1.2575, 1.2480.

USD/CAD

USD remains under pressure

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Current trend
During the Asian session, the USD/CAD pair shows ambiguous trading dynamics, consolidating near the level of 1.2650 around the local lows of December 8.
The American currency remains under moderate pressure after publishing ambiguous statistics on the US labor market for December last Friday. In particular, the number of new jobs amounted to only 199K, having fallen from the previous 249K, although the market forecasts assumed a steady growth of 400K. The published data are slightly at odds with the earlier released minutes of the US Federal Reserve, in which the American regulator tried to take a tougher stance about the reduction of existing incentives.

In turn, the corresponding Canadian report, published at the same time as the American one, was a little more optimistic. The employment indicator for December slowed down from 153.7K to 54.7K but was much better than experts' expectations of 27.5K. At the same time, the unemployment rate, as in the case of the United States, fell from 6% to 5.9%.

Support and resistance
On the daily chart, Bollinger bands steadily decline. The price range expands but not as fast as the "bearish" dynamics develop. The MACD indicator is going down, maintaining a strong sell signal (the histogram is below the signal line). Stochastic maintains a confident downward trend, but it is near its lows, signaling the dollar may become oversold in the ultra-short term.

Resistance levels: 1.2700, 1.2743, 1.2777, 1.2812.
Support levels: 1.2600, 1.2558, 1.2500, 1.2450.

AUD/USD
Positive statistics support the instrument

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Current trend
The AUD/USD pair trades above the level of 0.7158, supported by the macroeconomic statistics.

Thus, the number of preliminary building permits in Australia rose by 3.6%, despite the forecast of 3.2%. The previous value was revised downward to –13.6%. Investors expect the November retail sales data to be released tomorrow at 02:30 (GMT+2). According to forecasts, it will amount to 3.9%. Positive economic data from Australia temporarily restrain the trading instrument from further decline, leaving a chance for the "bulls" to break through the level of 0.7265.

Additional support to the asset was provided by publishing data on the US labor market last Friday. December Nonfarm Payrolls amounted to 199K against the forecast of 400K, but the previous figure was corrected upward from 210K to 249K. Unemployment decreased again and amounted to 3.9%, although analysts had forecast a decline of 0.1% to 4.1%.

On the other hand, Australia is starting to vaccinate children aged 5–12 years after the number of infections increased significantly on New Year's holidays, exceeding 116K cases per day. The virus forces Queensland to postpone its annual school reopening by a month until early February. The epidemiological situation is worsening, although politicians cite positive scientific studies on the effect of the Omicron strain on mortality to maintain optimism. For a while, it may support buyers of the Australian dollar, but given the planned rate hikes by the US Federal Reserve in 2022, the pair's growth looks limited.

Support and resistance
The long-term trend is downwards. In December, the pair gained support at 0.6995, after which it started an upward correction, within which it tested the resistance level of 0.7265. If this level is held, the fall will continue with the target at the December low.

The medium-term trend is upwards towards the target zone 2 (0.7329–0.7313). Last week, the price corrected, approaching the key support for the trend around 0.7117–0.7101. After the test of key support, it is worth opening long positions.

Resistance levels: 0.7265, 0.7457, 0.7541.
Support levels: 0.7158, 0.6995, 0.6830.

USDCHF
Investor Interest in the USD is Growing

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Current trend
The inability of the "bears" to renew the November lows and the return to the support level of 0.9165 act as catalysts for the resumption of the uptrend in USD/CHF. Weak data on Nonfarm Payrolls in the US in December could not radically change the situation in the asset, because even before their publication, the quotes set new lows around 0.9090, and instead of continuing to fall, the instrument again grows above the level of 0.9165.

The number of jobs created in the US non-agricultural sector in December amounted to 199K against the projected 400K. The decrease in the indicator can be attributed to the seasonal factor and the Christmas holidays. In turn, Unemployment Rate in the United States fell from 4.2% to 3.9% with the forecast of a decline to 4.1%.

The long-term trend in USD/CHF remains upward. The first target is the resistance at 0.9261, but the main point for the "bulls" movement is the November high at 0.9360. The key support is at 0.9089.

As part of the medium-term downtrend at the end of last year, traders reached target zone 2 (0.9147–0.9136), after which the price went into correction. Now the instrument is trading near the key resistance of the trend at 0.9231–0.9219 and, if it is held, the target of the decline will be at the December low. If the resistance is broken through, the priority for trading will change to an upward one.

Support and resistance
Resistance levels: 0.9261, 0.9339, 0.9360.
Support levels: 0.9165, 0.9089, 0.9033.

BTC is losing ground amid events in Kazakhstan

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Current trend
Last week, the BTC/USD pair continued to decline and tested the level of 41000.00.
The instrument was pressured by two negative factors – the publication of the minutes of the last meeting of the US Federal Reserve, filled with the “hawkish” rhetoric, and the events in Kazakhstan. In the minutes of the American regulator, it was noted that it could start raising rates earlier than planned, as the factors of inflation growth in the country persist. Experts believe that the first increase may take place in March, and the December positive data on the US labor market only strengthens confidence in this. The prospect of an imminent tightening of monetary policy puts pressure on alternative assets, including digital ones.
Events in Kazakhstan, where more than 18% of the world's cryptocurrency mining is concentrated, led to a decrease in the activity of large mining pools and a decrease in the BTC hash rate by 12%. Currently, the situation is normalizing, however, the first cryptocurrency does not receive the necessary support to restore lost positions.

Support and resistance
The key “bearish” level is 41000.00. Its breakdown allows further decline to 37500.00 (Murrey [–2/8]). The breakout of 43750.00 (Murrey [–1/8]) allows growth to 46400.00 (middle line of Bollinger bands) and 50000.00 (Murrey [0/8]). The continuation of the decline seems more likely since the reversal of Bollinger bands downward and the increase in the MACD histogram in the negative zone indicate that the downtrend continues. Stochastic's exit from the oversold zone does not exclude an upward correction but its potential seems limited.

Resistance levels: 43750.00, 46400.00, 50000.00.
Support levels: 41000.00, 37500.00.

Dow Jones

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Current trend
US stock indices continue their correctional decline. The Dow Jones index dropped to autumn highs around 36200.0.

The end of last week was marked by a number of negative events for the US stock market. First of all, this concerns disappointing data on the labor market: Nonfarm Payrolls was again significantly below expectations, adding only 199K against the outlook of 400K. In the private non-agricultural sector, the number of jobs created also turned out to be 154K lower than analysts' forecast.

The negative factor for the quotes was the growth in bond yields, which significantly exceeded the yield on the most liquid stocks. The indicator for the popular 10-year US securities just from the beginning of the year soared from 1.512% to 1.765%. The yield rate on conservative 20-year debt securities rose from 1.9371% to 2.1535%, which is the most dynamic growth since September last year.

The growth leaders in the index are Walgreens Boots Inc. (+2.67%), The Travelers Companies Inc. (+2.41%), Honeywell Inc. (+2.34%), Verizon Communications Inc. (+2.11%).
Among the leaders of the decline are Home Depot Inc. (-2.99%), Nike Inc. (-2.53%), UnitedHealth Inc. (-2.35%).

Support and resistance
Index quotes remain in the global sideways trend, decreasing within the corrective wave. The range of the Alligator indicator EMAs fluctuations remains rather wide, and the histogram of the AO oscillator forms descending bars being deep in the purchase area.

Support levels: 35628.0, 34846.0.
Resistance levels: 36911.0, 37600.0.

XAU/USD

Traders prefer bonds over gold

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Current trend
Gold quotes continue to trade near the psychological level of 1800.0, correcting in a downtrend. Serious fluctuations in the asset are unlikely in the near future.
Investors are awaiting concrete action from the US Fed, and the movement in XAU/USD is likely to begin after the start of the interest rate hike cycle. The change in the volume of the quantitative easing (QE) program does not have a strong impact on the price of the precious metal, so traders will wait for more serious drivers to appear, leaving part of their capital in bonds, which now show a higher yield than gold. For example, since January 1, the yield on 10-year US bonds has grown from 1.512% to 1.765%, and gold quotes during this period have decreased from 1830 to 1792 dollars per ounce.

According to the Commodity Futures Trading Commission (CFTC), the number of investor positions in gold last week fell to 211.4K from 213.2K a week earlier. This distribution confirms the fact that there are now much more interesting assets for investors than metals, which have not actually changed the current trend since last summer.

Support and resistance
On the daily chart, the price is trading within the global sideways channel, moving towards the lower border. Technical indicators are ready to reverse and give a signal for the start of sales: fast EMAs have reached the signal line with a readiness to cross it, and the histogram of the AO oscillator is forming descending bars, quickly approaching the transition level.

Support levels: 1770.0, 1725.0.
Resistance levels: 1831.0, 1870.0.

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USD/JPY
US labor market report disappoints the market

Current trend
The USD/JPY declines, trading around 115.81. Also to poor macroeconomic statistics, the asset is negatively affected by the introduction of new coronavirus restrictions in some prefectures of Japan.

The areas of Okinawa, Hiroshima, and Yamaguchi had the highest number of new cases of infection, and the authorities decided to restrict the operation of catering establishments and public events. The head of the Japanese Doctors' Association, Toshio Nakagawa, announced the sixth wave of the epidemic in the country. On Thursday, for the first time since mid-September, 4.475K infected people per day were detected. Also, the Household Expenditure Index declined by 1.3% YoY for November, with an expected growth of 1.6%, and declined by 1.2% MoM after rising by 3.4% for the previous period.

USD didn't take full advantage of the JPY weakness, as the report on the US labor market disappointed investors. Although the unemployment rate for December fell to 3.9% from 4.2% for November, Nonfarm Payrolls increased by only 199K, with an expected increase of 400K. Private Nonfarm Payrolls rose by 211K, below the projected 365K people, too. The number of jobs in the manufacturing industry also was worse than expected – 26K against 35K forecasted.

Support and resistance
The instrument is correcting upwards, trying to consolidate above the global high of the year. Technical indicators maintain a stable buy signal: indicator Alligator's EMA fluctuations range expands upwards, and the histogram of the AO oscillator forms new upward bars in the buy zone.
Resistance levels: 116.34, 118.00.
Support levels: 114.83, 112.70.

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USD/JPY Wave Analysis

The pair may grow.
On the daily chart, the third wave of the higher level 3 of (1) develops, within which the first wave of the lower level i of 3 formed, a correction developed as the second wave ii of 3, and the third wave iii of 3 develops. Now, the third wave of the lower level (iii) of iii has formed, a local correction has ended as the wave (iv) of iii, and the fifth wave (v) of iii is developing. If the assumption is correct, the pair will grow to the levels of 118.00–120.60. In this scenario, critical stop loss level is 113.10.

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XAG/USD Elliot Wave Analysis

The pair may grow.
On the daily chart, the first wave of the higher level (1) of 3 formed, a downward correction developed as the wave (2) of 3, and the development of the third wave (3) of 3 started. Now, the first wave of the lower level i of 1 of (3) has formed, a local correction has developed as the wave ii of 1, and the formation of the wave iii of 1 has started, within which the development of the wave (iii) of iii has started. If the assumption is correct, the price will grow to the levels of 26.76–28.68. In this scenario, critical stop loss level is 21.40.

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ETH/USD, Technical Analysis

Current trend
Last week, ETH/USD continued to decline and reached four-month lows around 3125.00 (Murray [2/8]), while leaving the descending channel. Further movement of quotations is likely to continue to the levels of 2812.50 (Murray [1/8]) and 2500.00 (Murray [0/8]).

In general, the downtrend in the asset remains, which is confirmed by the downward reversal of Bollinger Bands and the increase in the MACD histogram in the negative zone; however, the reversal of Stochastic from the overbought zone does not exclude an upward correction. In case of a breakout of the lower border of the descending channel in the area of 3270.00, the trend is likely to change to the levels of 3540.00 (Fibonacci retracement 61.8%, the center line of Bollinger Bands) and 3750.00 (Fibonacci retracement 50.0%, Murray [4/8]). Nevertheless, a decline in quotations is the most likely scenario at the moment.

Support and resistance
Resistance levels: 3270, 3540, 3750
Support levels: 3125, 2812, 2500

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United States of America
The US currency is strengthening against the yen today and has ambiguous dynamics paired with the euro and the pound.

Investors are waiting for today's speech by the head of the US Fed Jerome Powell in front of the Committee on Banking, Housing and Urban Affairs of the US Senate. It is expected that before approving his candidacy for the post of head of the US regulator for a new four-year term, Powell will answer questions from Senators who will be interested in the measures taken by the US Fed to combat high inflation. Thus, Powell can clarify the further steps of the regulator in the field of monetary policy. Currently, it is believed that the beginning of the rate hike may begin as early as March, and not in the summer or at the end of the year, as previously thought. Moreover, Goldman Sachs experts expect four increases at once during the year. In general, Powell's comments can cause a significant market movement.

Eurozone
The European currency is strengthening against the yen today and has ambiguous dynamics paired with the USD and the pound.

In the absence of significant economic releases, the attention of European investors is focused on the comments of representatives of the European Central Bank regarding the high inflationary pressure on the European economy. It should be recalled that in December, the consumer price index in the eurozone countries increased by a record 5.0%. Today, the head of the regulator, Christine Lagarde, said that she understands the concerns of citizens about high prices, and confirmed that they can trust the ECB in solving this problem. According to her, the bank stands for price stability, which is crucial for fixing inflation expectations and confidence in the currency. ECB Chief Economist Philip Lane said the ECB still does not expect inflation to exceed the 2.0% target in the medium term. The new governor of the German Bundesbank, Joachim Nagel, noted that the price increase may continue longer than expected. In general, European officials have not yet specified new ways to combat inflationary pressure.

United Kingdom
The British currency is strengthening against the yen today and has ambiguous dynamics paired with the USD and the euro.

December retail sales data from the British Retail Consortium (BRC) was published today. On an annualized basis, sales increased by 0.6%, which is better than market expectations (0.3%), but worse than the November growth of 1.8%. In general, BRC specialists are skeptical. They believe that retail trade will face significant pressure this year, as consumer spending will be restrained by rising inflation, an increase in energy bills and a tax increase coming in April. It should be noted that the British government is trying to mitigate inflationary pressure on the economy. Thus, The Times newspaper reported that the Ministry of Finance of the United Kingdom is considering the possibility of reducing the "green levy", which is levied on electricity consumption, in order to slow down the increase in prices in the energy market.

Japan
The Japanese currency is weakening today against its main competitors - the pound, the USD and the euro.

The focus of investors' attention remains the epidemiological situation in the country, which continues to be difficult. Prime Minister Fumio Kishida said today that the government will maintain the current strict restrictions on entry into the country until the end of February, although a number of exceptions may be made for humanitarian reasons. Currently, Japan has one of the strictest border regimes in the world, which prohibits residents from entering the country without Japanese citizenship, including foreign members of Japanese families and people permanently living in Japan. It is believed that this measure slows down the spread of the COVID-19 Omicron strain in the country. It also should be noted that according to the quarterly survey of the Bank of Japan, inflation expectations of Japanese households have risen to a two-year high. 78.8% of respondents expect prices to rise during the year, which gives investors hope that the Japanese regulator will still be able to push the inflation rate to the target level of 2.0%.

Australia
The Australian currency is weakening against the euro, the pound and the USD today, but is strengthening against the yen.

Australian economic data released today turned out to be controversial. Retail sales in November accelerated growth from 4.9% to 7.3%, which is higher than the 3.9% expected by investors. However, the positive effect of these data was offset by weak trade statistics. The volume of exports of Australian goods in November increased by 2.0%, and imports into the country increased by 6.0%, which led to a reduction in the trade surplus from 10.781 to 9.423B Australian dollars.

Oil
Oil quotes are trying to grow today.

Prices are rising due to the increasing optimism of investors. Market participants believe that the growth in oil demand will be maintained, since the governments of the leading consumer states are abandoning overly strict quarantine measures to curb the coronavirus pandemic caused by the Omicron strain. In addition, prices are supported by the slow increase in oil production by OPEC+ countries, which have not yet chosen their quotas, and interruptions in the supply of "black gold" from Libya. During the day, investors are waiting for the publication of a weekly report on the amount of oil reserves in the USA from API. Last time, the figure fell by 6,432M barrels. The continuation of the trend may give additional support to oil quotes.

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NZDUSD
The market is updating November highs

Current trend
The pound is trading upward against the US currency during the morning session, renewing new local highs from November 4 and testing 1.3645 for a breakout.
Significant support for the instrument is still provided by the expectations of a further increase in interest rates from the Bank of England, which is still ahead of the US Fed, having adjusted its monetary policy in December. In addition, investors are positive about the success of the British government in overcoming the next wave of coronavirus. The country has managed to avoid the return of large-scale restrictions, while, despite high incidence rates, the UK has not faced an overload of the health care system due to high herd immunity and low fatality of the Omicron strain.
But the macroeconomic statistics from the UK published yesterday left much to be desired. BRC Like-For-Like Retail Sales fell sharply from 1.8% to 0.6%, which turned out to be worse than analysts' average forecasts. At the end of the week, investors expect the publication of a large block of macroeconomic statistics from the UK on the dynamics of GDP and industrial production in November.

Support and resistance
Bollinger Bands in D1 chart show stable growth. The price range is expanding but it fails to conform to the surge of "bullish" sentiments at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having reached its highs, reversed into a horizontal plane, indicating strongly overbought GBP in the ultra-short term.

Resistance levels: 1.3650, 1.37, 1.375, 1.38.
Support levels: 1.36, 1.355, 1.35, 1.346.

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XAU/USD

Gold is growing contrary to the plans of the US Fed

Current trend
XAU/USD is consolidating on Wednesday after strong growth the day before, which led to a renewal of local highs from January 5.

The instrument has been developing a "bullish" trend since the end of last week, when quotes were at local lows from December 16. At the same time, gold remains under pressure from the upcoming hikes in interest rates by the world's leading central banks, including the US Federal Reserve. Markets are almost sure that the American regulator will start raising rates already at its March meeting; however, they prefer to wait for today's publication of December statistics on consumer inflation.

At the same time, investors are counting on a balanced and careful approach to tightening monetary policy, as Jerome Powell spoke about in his speech to Congress the day before. The Chair of the US Fed stressed that plans to raise the rate and the final completion of the quantitative easing (QE) program should not harm the economy and the labor market, which is still very tense.

Support and resistance
Bollinger Bands in D1 chart show weak growth. The price range expands from above, freeing a path to new local highs for the "bulls". MACD indicator reverses to growth while forming a new buy signal (the histogram is about to consolidate above the signal line). Stochastic is showing similar dynamics; however, the indicator line is already approaching its highs, indicating the risks of an overbought instrument in the ultra-short term.

Existing long positions should be kept until technical indicators are clarified.

Resistance levels: 1823.09, 1831.66, 1850.00, 1868.46.
Support levels: 1814.06, 1800.00, 1790.00, 1778.32.

XRP/USD Technical Analysis
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Current trend
XRP/USD continues to trade within the long-term descending channel. This week the price reached monthly lows around 0.6940, after which it made an attempt to growth, the target of which may be the level of 0.8230 (the center line of Bollinger Bands); however, in general, the upside potential is limited, as the general downtrend continues.

The continuation of the decline seems more probable. In case of a breakdown of 0.7500 (Fibonacci retracement 61.8%), the price can reach the levels of 0.6836 (Murray [-1/8]) and 0.5860 (Murray [-2/8]). The downward reversal of Bollinger Bands and an increase in the MACD histogram in the negative zone confirm the continued downtrend; however, an upward reversal of Stochastic does not exclude the continuation of short-term growth.

Support and resistance
Resistance levels: 0.8230, 0.9100, 0.9766.
Support levels: 0.7500, 0.6836, 0.5860.

Brent Crude Oil, movement to the area of last year's highs

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Current trend
Brent Crude Oil is trading near 84.00 amid the rhetoric of the US Federal Reserve officials and market expectations that the global economy will continue to recover after the COVID-19 pandemic. The Omicron strain, identified at the end of November last year, did not affect fuel demand, as previous versions of the coronavirus did.

Additional support for the instrument is provided by yesterday's speech of the US Federal Reserve Chairman Jerome Powell. The official said the national economy must withstand rising COVID-19 infections and was poised to begin tightening monetary policy. At the same time, he made it clear that the regulator might raise rates slower than expected, which will support energy demand.

According to the American Petroleum Institute (API), weekly stocks fell by 1.077M barrels, better than analysts' forecast of a fall of 1.950M barrels, which, in turn, signals stable demand. Gasoline inventories rose by 10.9M barrels from preliminary estimates of 2.4M barrels, and distillates, including diesel and heating oil, rose 3M barrels, compared with forecasts of an increase of 1.8M barrels. On Tuesday, a renewed report from the US Energy Information Administration (EIA) was published, according to which in 2022, the total demand for energy in the country will continue to rise to 840K barrels per day, while the previous forecast assumed an increase to 700K barrels per day.

Support and resistance
The long-term trend is upwards. Yesterday, the traders broke through the resistance level 82.30, which is the nearest support today. The "bulls" are targeting the area of 86.29–85.48.

The medium-term trend remains upwards. Last week the price broke through target zone 2 (83.01–82.48), and the next direction of growth is target zone 3 (85.90–85.37). New long positions may be opened on the correction from the key support of the trend around 78.78–78.25.

Resistance levels: 85.48, 86.29, 90.00.
Support levels: 82.30, 80.00, 75.83.

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USD/JPY: development of a correction to an uptrend

Current trend
After reaching a 5-year high, USD/JPY went into a correction under the influence of investor disappointment due to high inflation in the US.
The Consumer Price Index in the US in annual terms reached the level of 7.0%, which is a record value over the past 40 years and requires a response from the US Federal Reserve in the form of an increase in interest rates. However, the situation with the new Omicron strain of coronavirus is forcing the regulator not to rush to make decisions regarding monetary policy. The Bank will respond to the dynamics of new cases of COVID-19 in order not to have a negative impact on the labor market by tightening monetary policy.

In turn, the Board of Governors of the Bank of Japan is discussing the possibility of raising the interest rate before inflation reaches the target level of 2%, which is facilitated by the dynamics of price growth in developed countries and the more "hawkish" policy of the US Fed. However, an actual increase in the rate is hardly possible, as the Japanese regulator adheres to the course of maintaining an ultra-soft policy at least until the end of this year. On the other hand, financial markets may underestimate the Bank of Japan's willingness to phase out its radical stimulus program.



Further dynamics in USD/JPY will depend on the US Fed's reaction to rising inflation and data on the labor market. According to yesterday's statistics, there is an increase in the number of Initial Jobless Claims, and this is an alarming signal for the US currency.
Support and resistance

The long-term trend is upward. Now the asset is trading in a downward correction, within which the price tends to test the nearest support level of 113.44 and if it is held, the growth will continue with the target of 116.10.
The mid-term trend remains upward. Today, the key trend support of 113.70–113.44 was tested, and if it is held by buyers, it will be possible to count on further growth with a target in the target zone 4 (117.29–117.07).



Resistance levels: 114.35, 115.40, 116.10.
Support levels: 113.44, 112.73, 111.95.