USD/JPY – Volatilty Continues as Yen Recovers

It’s been a busy week for USD/JPY, as the pair continues to display strong movement this week. The yen took a tumble on Tuesday, but has since recovered, as the Nikkei is again showing volatility. USD/JPY was trading in the low-102 range in Wednesday’s European session. In economic news, the US CB Consumer Confidence release was outstanding, as the indicator hit a four-year high. In Japan, Retail Sales posted another decline, although the reading did beat the estimate. Bank of Japan Governor Haruhiko Kuroda addressed an international conference in Japan. There are no Japanese releases on Wednesday. The sole US release is a speech by FOMC Member Eric Rosengren.

USD/JPY is showing strong volatility this week, as the Japanese stock market is once again showing volatility. Market confidence in the BOJ’s monetary policy is down, and this could undermine the central bank’s monetary easing program, which involves purchasing large amounts of government bonds. The BOJ was forced to intervene to calm the markets and said it would “fine-tune market operations” in order to ensure that long- and short-term interest rates remain stable. If this fails to assuage the markets, we  could see more  volatility from USD/JPY. Meanwhile, Japanese Retail Sales posted its fourth straight decline, dropping 0.1%. This was better than the forecast of -0.4%, but points to continuing weakness in consumer spending, despite the BOJ’s extreme monetary policy which has sent the yen tumbling.

The Japanese government and BOJ have declared deflation as Public Enemy Number One, and the BOJ has embarked on an aggressive monetary easing program, as it seeks to double the monetary base within two years. However, inflation indicators continue to point to deflation, despite these efforts. Corporate Services Price Index, which measures corporate inflation, actually worsened, as the indicator fell from -0.2% to -0.4%. Critics of the government’s agenda say economic growth cannot be created by monetary policy alone, and deflation continues to hobble the Japanese economy. If inflation doesn’t start to pick up, the government will face pressure to take additional steps to kick-start the economy.

 

USD/JPY for Wednesday, May 29, 2013

Forex Rate Graph 21/1/13
USD/JPY May 29 at 11:30 GMT

USD/JPY 101.28 H: 102.52 L: 100.97

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 100.66 101.81 102.60 103.75

 

USD/JPY continues to show volatility, and has recovered from Tuesday’s sharp losses. The pair is facing resistance at 101.81. Given the strong movement we are seeing from the pair, this line cannot be considered safe. This is followed by resistance at 102.60.  On the downside, there is support at 100.66. This is followed by a support level at the critical 100 level. 

  • Current range: 100.66 to 101.88

 

Further levels in both directions:

  • Below: 100.66, 100, 99.57 and 99.48
  • Above: 101.81, 102.60, 103.75, 104.94 and 105.87

 

OANDA’s Open Positions Ratio

USD/JPY ratio has shifted direction in the Wednesday session, and is pointing to movement towards long positions. This is reflected in the current movement of the pair, as the yen has posted sharp gains against the US dollar.

The pair continues to move sharply in both directions, as the yen has pushed back and is now trading in the low-101 range. We could see further volatility on Thursday, as both the US and Japan release a host of important indicators.

 

USD/JPY Fundamentals

  • 13:00 US FOMC Member Eric Rosengren 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.