USD/JPY is testing the 99 line in Tuesday’s European session. The pair pushed as high as 99.66 in the Asian session, but has since retracted. Expectations are increasing that we will soon break the 1oo mark, as the Bank of Japan moves full steam ahead with its monetary stimulus package. In economic news, the BOJ releases the minutes from recent policy meetings. Japanese Preliminary Machine Tool Orders continues to post sharp declines, as the indicator dropped 21.6 %. Bank Lending will be released later on Tuesday. In the US, there are two minor releases on Tuesday.
USD/JPY continues to move higher, and the pair is within striking distance of the psychologically significant 100 level. We last saw this level in April 2009. The minutes from the most recent BOJ meeting indicate that the central bank was about to embark on a radical overhaul of monetary policy, and the BOJ has not disappointed, wasting no time in implementing further easing measures. The BOJ plans to double its asset purchase program by 2015, and made good on its promise to purchase large amounts of government bonds. This move is aimed at pushing down longer-term interest rates in order to encourage businesses to borrow and spend more in order to increase activity in the economy and eliminate inflation, which has hobbled the Japanese economy for 15 years. The BOJ began its purchase of government bonds on Monday, and said it would purchase JPY 1 trillion in 5-10 year bonds, and an additional JPY200 billion in bonds with maturities exceeding 10 years.
In the US, talk of a deepening recovery is being replaced by concerns about the direction the economy, as the US continues to post out dismal numbers. With every major release over the past two weeks failing to meet expectations, the markets are justifiably becoming increasingly anxious. The data comes from sectors throughout the economy – housing, manufacturing consumer confidence and employment releases have all missed their estimates. On Friday, Non-Farm Payrolls followed the string of dismal releases, posting its worst showing since July 2012. There were 88 thousand new jobs created, way below the estimate of 198 thousand. Will we see a turnaround in this week’s numbers? If not, we could see some volatility in the currency markets.
USD/JPY for Tuesday, April 9, 2013
USD/JPY April 9 at 11:25 GMT
USD/JPY 98.94 H: 99.66 L: 98.71
In Tuesday trading, USD/JPY is testing the 99 level. The proximate resistance and support lines are holding firm (R1 and S1 above). The pair is receiving support at 98.45. This line could face pressure if the yen shows improvement. The next support level is at 97.24. On the upside, there is resistance at 99.57. This is followed by the all-important round number of 100.
- Current range: 98.45 to 99.57.
Further levels in both directions:
- Below: 98.45, 97.24, 96.03, 95.27 and 94.59
- Above: 99.57, 100, 100.54 and 101.81
OANDA’s Open Position Ratios
USD/JPY ratio is pointing to movement towards long positions. This activity is reflected in the pair’s current upward trend, as the dollar continues to push higher. Further movement in the ratio in this direction would be an indication that trader sentiment expects the yen to continue to lose ground against the US dollar.
With the BOJ implementing aggressive easing measures and the yen continuing to lose ground, expectations are increasing that USD/JPY will hit the 100 level shortly. There is plenty more room for the yen to fall, and we could see the pair continue its upward movement.
- 6:00 Japanese Preliminary Machine Tool Orders. Actual -21.6%.
- 11:30 US NFIB Small Business Index.
- 14:00 US Wholesale Inventories.
- 23:50 Japanese Bank Lending.
*Key releases are highlighted in bold
*All release times are GMT
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