USD/JPY – US Dollar Continues Rally

USD/JPY continues to move higher in Friday trading. The dollar got a major boost after US Federal Reserve head Bernard Bernanke stated that the Fed would likely begin to wind up the current QE program later in 2013.

The currency markets showed plenty of movement last week, reacting to comments from Federal Reserve chair Bernard Bernanke said that QE would likely be scaled down in 2013, and could be terminated in 2014, if the economy continues to improve. The Fed has put the markets on notice – if the US economy shows stronger growth and unemployment falls, expect the Fed to taper QE. It should be remembered that the Federal Reserve is not making any changes at present to QE, which involves bond purchases of $85 billion each month by the Fed. Bernanke’s comments boosted the dollar against the major currencies, including the yen, since scaling back QE is dollar-positive.

The Japanese government has implemented an ambitious monetary easing plan, but it appears too early to determine if it has been a success. There have been some signs of economic improvement, such as GDP and personal spending. The government is searching for ways to revive the lethargic Japanese economy, and is now touting a corporate tax cut as a possible option. Japan’s corporate tax rate is higher than most industrialized countries, at a hefty 36%. Lowering the rate would encourage foreign investors as well as Japanese companies to invest in the country. However, the government has been shy on specifics about this initiative, so we shouldn’t expect any dramatic changes in the short term.

USD/JPY for Friday, June 21, 2013

USD/JPY 97.92 H: 98.39 L: 97.77

USD/JPY Technical

USD/JPY has moved lower in Monday trading, as the pair has dipped below the 97 line. The line of 97.18 continues to provide support. The next support level is at 96.03, protecting the 96 line. On the upside, there is plenty of room for the pair to move higher, with no major resistance until 98.94.

• Current range: 97.18 to 98.94

Further levels in both directions:

• Below: 97.18, 96.03, 94.91, 94.02, 92.73 and 91.62
• Above: 98.94, 99.57, 100.00 and 100.85

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in Friday trading. This is reflected in the current movement of the pair, as the yen has reversed direction and posted modest gains against the dollar. Long positions make up most of the ratio, indicating a strong bias towards USD/JPY moving higher.

USD/JPY Fundamentals

• BOJ Governor Haruhiko Kuroda Speaks

*Key releases are highlighted in bold

*All release times are GMT

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