USD/JPY is sharply higher in Thursday trading, after the Bank of Japan announced bold easing measures at its policy meeting. The pair rocketed over 250 points in the Asian session, climbing to the mid-95 range. As expected, the BOJ made no changes to the current interest rate level of 0%-0.10%. In the US, today’s major release is Unemployment Claims. As well, Federal Reserve head Bernard Bernanke will address a conference in Dayton, Ohio.
Throughout the week, the yen was firm, as speculation grew that the BOJ would not take any aggressive action at Thursday’s policy meeting, the first under new BOJ Governor Haruhiko Kuroda. The Japanese currency showed some muscle, as USD/JPY dipped below the 93 level. However, the tables were turned on Thursday as the BOJ surprised everyone with aggressive easing measures. The measures include expanding QE to include riskier assets such as ETFs (exchange traded funds) and real estate investment funds. As well, the BOJ will purchase longer-term government bonds, a move aimed at pushing down longer-term interest rates to coax businesses to borrow (and spend) more. The BOJ stated that it plans to boost the monetary base by JPY60-70 trillion each year, reaching JPY270 trillion by the end of 2014. The news led to a surge by the US dollar against the yen, with USD/JPY jumping to the mid-95 range.
The drama and uncertainty in Cyprus, one of the Eurozone’s smallest members, continues, even though a bailout plan has been accepted by all sides. Strict capital controls are still in place in Cyprus in order to prevent a run on the banks. Under the bailout agreement, bank deposits below EUR1000,000 are safe, but larger accounts with the Bank of Cyprus will be facing a haircut of up to 60%. An amount of 37.5% of these deposits will be converted into bank shares, and up to 22.5% more could be grabbed in order to prop up the Bank of Cyprus’ reserves. This steep tax is expected to have a strong negative impact on the country’s business sector, and the government has admitted that the country is in recession. In order to help the ailing economy, the government plans to lift a ban on casinos and provide tax exemptions on business profits that are reinvested on the island. President Nicos Anastasiades has acknowledged that the bailout agreement is a bitter pill for Cypriots, but said that refusing the agreement would have meant the collapse of the banking sector and could have led to Cyprus’ exit from the Eurozone. In a dramatic development, Cyprus finance minister Michael Sarris has resigned. His resignation comes as Cyprus initiates a formal investigation to examine the events which lead to the EUR10 billion bailout.
In the US, there is concern about a steady string of weak data. Last week saw a host of dismal US releases, as manufacturing, housing, consumer confidence and employment figures all fell below expectations. The bad news has continued into April, as PMIs and the ADP Non-Farm Employment Change were way below the estimates. The markets will be hoping for better news from today’s major event, Unemployment Claims.
USD/JPY for Thursday, April 4, 2013
USD/JPY April 4 at 12:10 GMT
USD/JPY 95.44 H: 95.67 L: 92.73
USD/JPY has shot up in Thursday trading, following the BOJ policy meeting. The pair has climbed above the 95 line, and is facing resistance at 96.02. This line could see activity if the yen continues to weaken. The next level of resistance is at 976.24. On the downside, 95.27 is providing support. This weak line could be tested as the pair is showing strong movement. We next encounter support at 94.59.
- Current range: 95.27 to 96.02
Further levels in both directions:
- Below: 94.59, 93.14, 92.53, 91.48 and 90.69
- Above: 95.27, 96.02, 97.24, 98.45
OANDA’s Open Position Ratios
USD/JPY ratio is pointing to a strong shift in the direction of short positions in the Thursday session. Currently, USD/JPY is moving in the opposite direction, as the yen has taken a beating from the US dollar. The activity in the ratio could be an indication that trader sentiment expects a reversal after the pair’s sharp rise earlier today.
The markets go caught with their pants down, as the BOJ pulled the trigger on bold easing steps. USD/JPY has shot up in response, gaining over 250 points in the Asian session. We can expect the volatility to continue, as the US releases Unemployment Claims, and the ECB holds its policy meeting as well.
- 4:40 Japanese Monetary Policy Statement
- 4:40 Japanese Overnight Call Rate. Estimate 0%-0.10%. Actual 0%-0.10%
- 7:34 Japanese BOJ Press Conference
- 11:30 US Challenger Job Cuts
- 12:30 US Unemployment Claims. Estimate 352K
- 12:45 US FOMC Member Charles Evan Speaks
- 14:30 US Fed Chairman Bernard Bernanke Speaks
- 14:30 US Natural Gas Storage. Estimate -89B
- 16:30 US FOMC Member Esther George Speaks
- 21:00 US FOMC Member Janet Yellen Speaks
*Key releases are highlighted in bold
*All release times are GMT