USD/JPY – Yen Slumps as 100 Again in Sight

The Japanese yen lost ground on Friday, and USD/JPY has once again moved closer to the elusive 100 level. The pair pushed above 99, and was trading at 99.25 in the European session. The yen took a hit after Japan’s finance minister stated that Japan had not run into any opposition over its monetary policy at the G20 meeting. In economic releases, Japanese All Industries Activity rebounded strongly from last month’s decline, and posted a gain of 0.6%. This blew past the estimate of a 0.6% decline. The G20 wraps up a two-day meeting in Washington on Friday. There are no US releases on the schedule.

For those market watchers who were counting on a turnaround from US releases, they’ll  have to wait some more, as the US continues to churn out weak economic numbers. Thursday saw more key releases and more bad news, as employment and manufacturing numbers disappointed. Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. The Philly Fed Manufacturing Index dropped from 2.0 points to 1.3 points, nowhere near the estimate of 2.7 points. The weak numbers have dogged the US since March, and are raising red flags about the extent of the US recovery.

The markets are keeping a close eye on the two-day G20 meeting in Washington, which wraps up on Friday. Prior to the meeting, US Treasury Secretary Jack Lew warned against currency devaluations, singling out China. Washington is also concerned about stagnation in the Eurozone, and is urging Germany to take steps to help the Eurozone’s weaker members in Southern Europe, such as Spain, Cyprus and Greece. The slumping yen is also a hot topic, as many of Japan’s trading partners have seen their exports take a hit due to a weaker yen, which has plummeted against the euro and the US dollar. Given this context, it is a bit surprising that Japan’s finance minister, Taro Aso, stated that the G20 accepted Japan’s view that its aggressive monetary easing is aimed at stamping out deflation, rather than an attempt to weaken the yen and make it more competitive. We’ll have to wait and see if the final communiqué from the G20 runs along the same lines as Aso’s statement. Meanwhile the yen lost ground, as USD/JPY crossed above the 99 line.

Earlier this week, the IMF released a report on global growth, and the news was mostly negative. The IMF downgraded its 2013 forecast for global growth from 3.5% to 3.3%, and lowered the 2014 prediction from 4.1% to 4.0%. There was some good news for Japan, as the IMF raised its forecast, from 1.2% to 1.6%. The report said that the Bank of Japan’s aggressive monetary steps would increase growth and combat deflation. However, the IMF did note its concern over Japan’s huge debt load, which continues to weigh on the economy.

USD/JPY for Friday, April 19, 2013

USD/JPY 99.22 H: 99.34 L: 98.10

Once again, the elusive 100 level is within striking distance, as USD trades in the low-99 range. The pair is facing resistance at 99.57. This line could fact pressure if the yen continues to lose ground. The next resistance line is at the psychologically important 100 level. On the downside, 98.45 is providing support. This line has strengthened as the pair trades at higher levels. The next support level is at 97.24.

• 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 quiet in Friday trading. This lack of activity is not reflected in the pair’s current trend, as the dollar continues to make gains against the yen. If the pair’s movement continues, we can expect to see the ratio swing into action as well.

USD/JPY came very close to the 100 level last week, and again appears to be closing in on this barrier. Will the dollar manage to sustain the current momentum and push past 100? With no US numbers on Friday, we’re unlikely to see the pair climb much further before the weekend, but next week the yen’s downward parade could continue.

USD/JPY Fundamentals

• 4:30 Japanese All Industries Activity. Estimate -0.6%. Actual 0.6%
• Day 1 – IMF Meetings
• Day 2 – G20 Meetings
• 16:00 US FOMC Member Jeremy Stein Speaks

*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.