USD/JPY – Steady as Markets Hopeful of Breakthrough in Debt Limit Crisis

USD/JPY is showing little movement in Tuesday trading. The pair is trading in the mid-98 range in Tuesday’s European session.  High-level talks continue in Washington, as the sides race against the clock to reach an agreement on raising the debt ceiling before Thursday. Taking a look at economic news, Japanese Revised Industrial Production fell 0.9%, missing the estimate. In the US, the markets will be keeping an eye on the Empire State Manufacturing Index. As well, Federal Reserve Chair Bernard Bernanke delivered remarks in Mexico City.

Politicians in Washington are racing to reach some agreement before the US hits the debt ceiling on Thursday. If Congress fails to agree on raising the debt limit before then, the US treasury will be unable to pay the country’s bills. This could lead to the US defaulting on its debt, which could cause chaos in the domestic and international markets. High-level talks over the weekend failed to break the impasse, but Senate Majority Leader Harry Reid sounded optimistic on Monday, saying that the sides had made “tremendous progress”. The talks are focusing on raising the debt ceiling for several more months until a more comprehensive agreement can be reached. Presumably, an agreement would also end the government shutdown, at least temporarily, allowing the government to resume operations.

The debt ceiling crisis is generating headlines the world over, as a US default on its financial obligations could lead to severe damage to the global economy. The US is being urged to get its act together, and quickly. The IMF has warned that the continuing uncertainty emanating out of Washington could lead to a world recession. ECB President Mario Draghi has also weighed in, saying that it was “unthinkable” that Congress would not reach an agreement on the debt ceiling.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Last week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. The bottom line? We’re unlikely to see any QE moves by the Fed before December, at the earliest.

 

USD/JPY for Tuesday, October 15, 2013

Forex Rate Graph 21/1/13

USD/JPY October 15 at 10:00 GMT

USD/JPY 98.23 H: 98.35 L: 98.22

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
96.00 97.18 97.87 98.43 99.45 100.00

 

  • USD/JPY is steady in Tuesday trading, as the pair trades in the mid-98 range.
  • The pair is facing resistance at 98.43. This is a weak line which could fall during the day. This is followed by stronger resistance at 99.45.
  • On the downside, USD/JPY continues to receive support at 97.87. This is followed by support at 97.18.
  • Current range: 97.87 to 98.43

 

Further levels in both directions:

  • Below: 97.87, 97.18, 96.00, 95.06 and 94.20
  • Above: 98.43, 99.45, 100 and 101.19

 

OANDA’s Open Positions Ratio

USD/JPY ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar posting gains against the yen.

USD/JPY is trading quietly in the mid-98 level. We could see some volatility from the pair in the North American session, if there is an announcement of an agreement on the debt ceiling out of Capitol Hill.

 

USD/JPY Fundamentals

  • 1:00 Federal Reserve Chairman Bernard Bernanke Speaks.
  • 4:30 Japanese Revised Industrial Production. Estimate -0.7%. Actual -0.9%.
  • 12:30 US Empire State Manufacturing Index. Estimate 8.2 points.
  • 14:00 FOMC Member William Dudley 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.