USD/JPY – Yen Improves As Markets Eye BOJ Minutes

USD/JPY has lost ground on Tuesday, as the pair trades in the low-98 range in European trading. The Bank of Japan is in the spotlight today, as BOJ Governor Haruhiko Kuroda addressed an event in Osaka, and the minutes from the Bank’s most recent policy meeting will be released later on Tuesday. In the US, today’s highlight is ISM Non-Manufacturing PMI.

Speaking to a group of business leaders in Osaka, BOJ head Haruhiko Kuroda expressed confidence that the Bank would successfully reach its inflation target of 2.0% by 2015. However, many analysts are skeptical that this goal will be met, as National Core CPI rose just 0.7% in September. The yen’s drop of about 12% in 2013 has provided some inflation by increasing import prices, but growth has stalled and there is growing concerns that the country could be headed for an economic downturn, which would likely push down further on the weak yen. Analysts will be combing through the minutes of the Bank’s most recent policy minutes, which will be released late Tuesday.

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. Still, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

After a host of weak numbers, US numbers showed some improvement late last week. Unemployment Claims practically matched the forecast, and ISM Manufacturing PMI beat the estimate. With the Fed unlikely to taper QE before 2014, the QE uncertainty which was has been weighing on the dollar has eased, and the dollar could  post gains against the weak Japanese yen.

USD/JPY for Tuesday, November 5, 2013

USD/JPY November 5 at 12:30 GMT

USD/JPY 98.33 H: 98.64 L: 98.17

USD/JPY Technical

• USD/JPY has posted modest losses on Tuesday, as the proximate support and resistance lines (S1 and R1 above) remain in place.
• On the downside, 98.15 continues to provide support. It is a weak line and could see pressure if the yen shows any upward movement. This is followed by strong support at 97.18.
• On the upside, the pair is facing resistance at 98.92. This line is followed by the key level of 100, which has held firm since mid-September.
• Current range: 98.15 to 98.92

Further levels in both directions:

• Below: 98.15, 97.18, 96.00, 95.06 and 94.20
• Above: 98.92, 100, 101.19 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains by long positions in Tuesday trading. This is not reflected in the current movement of the pair, as the yen has posted gains against the dollar. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar moving higher.

The pair is trading in the low-98 range, as the yen has posted gains on Tuesday. We could see some further movement of the pair in the North American session, as the US releases key services data later in the day.

USD/JPY Fundamentals

• 5:30 BOJ Governor Haruhiko Kuroda addressed business leaders in Osaka.
• 15:00 US ISM Non-Manufacturing PMI. Estimate 54.2 points.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 41.1 points.

*Key releases are highlighted in bold

*All release times are GMT

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