USD/JPY – Yen Edges Higher as BOJ Stands Pat

The Japanese yen has improved against the US dollar, after the Bank of Japan refrained from more taking additional monetary easing steps. USD/JPY was trading in the low-93 range in Thursday’s European session. Japanese GDP was a disappointment, pointing to a slight contraction in the economy. Thursday’s highlight is US Unemployment Claims.

As expected, the Bank of Japan did not introduce further monetary easing measures at its policy meeting on Thursday. The benchmark interest rate remains at 0-0.10%. The markets responded positively, and the Japanese yen improved against the dollar. USD/JPY was trading in the 93.20 range, and we could see the pair test the 93 level. The yen shrugged off a disappointing Q4 release for 2012, as the economy contracted 0.1%. The markets had anticipated a gain of 0.1%. For 2012, the Japanese economy posted growth of 1.9%. This was a great improvement compared to the 0.6% decline in 2011, and the markets are hopeful that the government’s stimulus moves will bear fruit and breathe life into the economy. This was the final BOJ policy meeting chaired by Governor Masaaki Shirakawa, who leaves his post in March. Prime Minister Abe will be handpicking his successor, who will likely tow the government’s line on monetary policy.

One reason why the BOJ may have decided to keep a low profile at this week’s policy meeting is the upcoming G-20 meeting. An important topic on the agenda will be the issue of exchange rates. There is mounting concern about currency wars, and Japan is coming under strong criticism for increasingly relying on monetary policy to kick-start its economy. The G-7, clearly concerned about the falling Japanese yen, reiterated its commitment to allowing the markets to determine exchange rates. The Institute of International Finance, which is comprised of leading banks and financial institutions, also weighed in on the matter. It urged the G-20 to take steps to avoid the “possible discord on exchange rates”.  For its part, the Japanese government has defended its monetary policy, stating that its aggressive easing steps have been taken to combat deflation, and it has not actively devalued the yen. Japan’s trading partners may beg to differ, but we’re unlikely to see any fireworks at the G-20 over this matter. Given the need to reach a consensus, analysts expect any statement on currencies from the G-20 to be mild in nature. 

USD/JPY for Thursday, February 14, 2013

USD/JPY February 14 at 12:00 GMT

USD/JPY 93.19 H: 93.71 L: 93.10

USD/JPY has edged lower, but the proximate support and resistance lines (S1 and R1 above) remain intact. On the downside, there is strong pressure on 93.14. The line of 92.53 is providing stronger support. Looking at the upside, the next line of resistance is at 93.73. This is followed by resistance at 94.59.

• Current range: 93.14 to 93.73

Further levels in both directions:

• Below: 93.14, 92.53, 91.94, 91.30 and 90.91
• Above: 93.73, 94.59, 95.27, 96.06 and 97.54.

OANDA’s Open Position Ratios

The USD/JPY ratio continues to fluctuate, and has again shifted directions. We are currently seeing a move towards short positions. This activity is reflected in the currency pair, as the yen has posted modest gains against the dollar. With the pair showing quite a bit of activity, we can expect the movement in the ratio to continue as well.

The yen has pushed higher, as the BOJ did not take any action. However, this lull is likely to be temporary, with Japanese senior officials hinting at further monetary easing measures and economic indicators continuing to point to a sluggish Japanese economy. This mix points to a weaker yen. However, he US releases Unemployment Claims later in the day, and this indicator is often a market-mover.

USD/JPY Fundamentals

• 3:39 Bank of Japan Monetary Policy Statement.
• 3:39 Bank of Japan Overnight Call Rate.
• 3:39 Bank of Japan Press Conference.
• 13:30 US Unemployment Claims. Estimate 361K.
• 15:30 US FOMC Member Daniel Tarullo Speaks.
• 15:30 US Natural Gas Storage. Estimate -166B.
• 17:50 US FOMC Member James Bullard Speaks.
• 18:00 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.