USD/JPY – Little Change as Dollar Tests 99 Line

USD/JPY continues to show little movement, as the pair tests the 99 line in Wednesday’s European session. In Japan, there are no releases scheduled on Wednesday. Later today, the US will release Crude Oil Inventories and auction off 10-year bonds.

USD/JPY has enjoyed an uneventful week, as the pair continues to trade at high levels. At its recent policy meeting, the BoJ noted that it could take more than two years to reach its 2% inflation target. This possibility has been underscored by recent Japanese inflation releases, which continue to point to deflation in the economy, despite the best efforts of the BOJ to create some inflation. This has fuelled expectations that the BOJ will resort to further easing measures later in the year, as Prime Minister Abe and BOJ Governor Kuroda have stated very clearly that they will do whatever is needed to stamp out deflation, which has hobbled the Japanese economy for years. So we could see the yen continue to lose ground against the US dollar, and hit the elusive 100 level.

In China, Trade Balance numbers looked sharp. After a rare deficit in the April reading, China reported a surplus of $18.2 billion in the May release. This beat the estimate of $15.5 billion, and was the best showing since February. However, traders should treat China’s trade data with caution, as the figures could be inflated to mask capital inflows into the country. Analysts have noted that a weak global economy has led to less demand for Chinese experts, so the figures being released by Chinese officials may not be accurate.

In Europe, the markets continue to pay close attention to the ECB. After the ECB took action and reduced interest rates, the markets had a chance to hear ECB head Mario Draghi, who spoke in Rome on Monday. Draghi said that last week’s cut was taken due to the continuing slowdown in the Eurozone, and urged Eurozone countries to take the necessary steps to get their fiscal houses in order. Draghi repeated that the ECB was open to further rate cuts, as well as lowering its deposit rates below zero. When he mentioned the latter point last week, the euro took a dive, but this time, the markets did not react. However, not all policymakers favor further reductions. Yves Mersch, an ECB board member, stated that interest rate cuts have limits to their effectiveness.

 

USD/JPY for Tuesday, May 8, 2013

Forex Rate Graph 21/1/13

USD/JPY May 8 at 11:00 GMT

USD/JPY 98.97 H: 99.15 L: 98.74

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
96.03 97.24 98.45 99.57 100.00 100.54

 

USD/JPY is showing little change in Wednesday, as the proximate resistance and support lines remain in place (R1 and S1 above). On the downside, the pair continues to receive support at 98.45. The next support level is at 97.24. The pair faces resistance at 99.57. This line could see some pressure if the dollar can push higher. This is followed by resistance at the all-important 100 line.

  • 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 and 101.81

 

OANDA’s Open Positions Ratio

USD/JPY continues to show no change in the Wednesday session. This is reflected in what we are seeing from the pair, which also is showing little movement. Traders should continue to monitor the ratio, as renewed movement could be an early indication that USD/JPY will break out of its narrow band.

USD/JPY has been quiet this week, and is sticking close to the 99 line. With no major economic releases until Thursday, we could see the pair continue to drift.

 

USD/JPY Fundamentals

  • 12:30 FOMC Member Jeremy Stein Speaks.
  • 14:30 US Crude Oil Inventories. Estimate 2.1M.
  • 17:00 US 10-year Bond Auction.
  • 18:00 US Treasury Secretary Jack Lew 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.