JPY/USD – Under Pressure as Markets Eye BOJ Meeting

USD/JPY continues to trade at high levels, as the pair remains close to the 100 level. The markets are keeping a close eye on the Bank of Japan, which holds a policy meeting on Friday. Deflation continues to be a problem as Japanese Corporate Services Price Index dropped 0.2%. However, this figure did beat the estimate of -0.4%. In the US, today’s highlight is Core Durable Goods Orders. There are no Japanese releases on Wednesday.

Over in the US, we’ve been treated to a long and unwanted streak of weak key releases. There wasn’t any good news from Existing Home Sales, which came in at 492 million, well off the estimate of 5.02 million. However, New Home Sales cheered up the markets with a solid release on Wednesday. The indicator climbed from 411 thousand to 417 thousand, edging past the estimate of 416 thousand. The markets will be hoping that the good news continues on Wednesday, with the release of key manufacturing data.

There was little surprise that the G20 did not take Japan to task over its monetary policies, which have resulted in the yen taking a tumble. G20 final statements tend not to criticize its members, and this meeting was no exception. Although there has been a lot of criticism leveled against Japan, the G20 issued a very soft statement about currency devaluation which made no mention Japan, giving it a green light to continue its aggressive easing measures. Finance Minister Taro Aso has insisted that the measures are aimed at stamping out deflation, and the yen’s plunge is a “byproduct”. With the BOJ moving full steam ahead in its fight against deflation, traders can expect the Japanese currency to continue to weaken.

 Meanwhile, the OECD has weighed in on developments in Japan. The well-respected organization said it was encouraged by the government’s efforts to restore growth by easing monetary policy and achieve a 2% inflation target. However, the OECD noted its concern about the rising national debt, which is more than double the size of the Japanese economy. However the rating agency Standard & Poor was less effusive in its praise, stating that it had found little evidence of the economy improving, and warned that a downgrade to Japan’s debt was a real possibility.

USD/JPY for Wednesday, April  24, 2013

USD/JPY 99.53 H: 99.76 L: 99.19

USD/JPY Technical

In Wednesday trading, USD/JPY is not showing much movement. On the upside, the pair is testing the 99.57 line, which was breached earlier today. The next level of  resistance is the all-important 100 line. On the downside, the pair is receiving support at 98.45. This is followed by a support level at 97.24.  

• Current range: 98.45 to 99.57

Further levels in both directions:

• Below: 98.45, 97.24, 96.03 and 95.27
• Above: 99.57, 100, 100.54, 101.81 and 102.57

OANDA’s Open Position Ratios

USD/JPY is showing movement in the direction of short positions. This activity is not reflected in the current trend, as the pair has not showed much movement in the Wednesday session. This activity in the ratio could be an early indication that the yen will improve and move away from the 100 level. 

USD/JPY is trading quietly, but remains in the spotlight, as the elusive 100 line is again within striking distance. With the US releasing key manufacturing data, we could see the pair show some movement later in the day.

USD/JPY Fundamentals

• 12:30 US Core Durable Goods Orders. Estimate 0.5%.
• 12:30 US Durable Goods Orders. Estimate -2.9%.
• 13:30 US Treasury Secretary Jack Lew Speaks.
• 14:30 US Crude Oil Inventories. Estimate 1.8M.

*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.