USD/JPY – Yen Edges Higher As Debt Talks Continue

USD/JPY is steady in Wednesday trading, as the pair trades in the mid-98 range in Wednesday’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, there is just one data report out of the US – NAHB Housing Market Index. There are no releases out of Japan on Wednesday.

The clock continues to tick away as politicians in Washington scramble to reach an agreement on the debt limit. The US debt stands at $16.7 trillion, and the debt limit will be reached on Thursday if Congress fails to reach an agreement to raise the limit. If the limit is reached, the US treasury will be unable to pay all of the country’s bills. This could lead to the US defaulting on its debt, which could cause chaos in the domestic and international markets. The Republicans have floated proposals which would delay some provisions in President Obama’s healthcare plan. The Democrats have countered that they will only talk about health care once an agreement is reached. With both sides continuing to play hardball, the relative calm we’ve seen in the markets could quickly dissipate if the two sides cannot reach some compromise.

As the politicians in Washington continue to squabble and shoot down rival proposals to end the debt deadlock, Fitch Ratings warned on Tuesday that it could cut the US’s triple AAA rating if the crisis is not resolved. Fitch stated that it would not make any moves before early 2014, but the statement reflects growing frustration in the markets over the continuing inability of Congress to agree on a budget or the raising of the debt ceiling. The well-respected ratings agency has put the US debt on a negative watch and said that the crisis had cast doubt over the credit of the United States and had undermined confidence “in the role of the US dollar as the pre-eminent global reserve currency”.

With the markets transfixed by the crisis in Washington, US economic releases, even major events, have been shunted to the backburners. However, Thursday’s US Unemployment Claims is a key release that could affect the US dollar. With major releases such as Non-Farm Payrolls on hold due to the US shutdown, Unemployment Claims has magnified in its importance. Last week’s release was not considered accurate due to technical problems, so tomorrow’s numbers are being eagerly awaited. The markets are bracing for another weak release, with an estimate of 357 thousand.

 

USD/JPY for Wednesday, October 16, 2013

Forex Rate Graph 21/1/13

USD/JPY October 16 at 11:40 GMT

USD/JPY 98.31 H: 98.63 L: 98.29

 

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 Wednesday trading, as the proximate support and resistance lines (S1 and R1 above) remain intact.
  • The pair continues to face resistance at 98.43. This is a weak line which could face strong pressure. This is followed by stronger resistance at 99.45.
  • On the downside, USD/JPY is receiving 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 is pointing to movement towards short positions in Wednesday trading. This is reflected in the movement of the pair, as the yen has posted modest gains. The 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

  • 14:00 US NAHB Housing Market Index. Estimate 58 points.
  • 18:00 US Beige Book.
  • 21:30 US FOMC Member Esther George 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.