USD/JPY – Yen Remains Under Pressure as Markets Eye G-20 Summit

The Japanese yen remains under pressure, and is showing some movement in Friday trading. The pair has edged upwards, and was trading in the high-92 range. There was good news out of the US on Thursday, as Unemployment Claims dropped sharply. Russia will play host to the G-20, which begins a two-day meeting on Friday. The markets are expecting that currency exchange rates will be on the agenda.

On Thursday, the markets were pleased as US Unemployment Claims dropped to 341 thousand, its lowest level in five years. The estimate stood at 361 thousand. This key indicator has been well below the 400K rate, which should translate into job growth. However, the unemployment rate remains stubbornly high, close to 8%. The reason for this is as the economy improves, more people who were out of the work force try again to find employment, which keeps the unemployment rate at high levels. Although employment numbers have shown improvement in 2013, the same cannot be said about US consumer confidence and manufacturing. The markets will be hoping for a turnaround in these sectors, as the US releases the Empire State Manufacturing Index and UoM Consumer Sentiment on Friday. Both of these key indicators have looked weak, and are market-movers in their own right. In Japan, the BOJ did not adjust interest rates or introduce more stimulus measures at this week’s policy meeting. However, most analysts believe this non-action is just a short pause, and expect further monetary easing steps as the governments tries to get the Japanese economy back on its feet. This could result in the yen losing even more value against the US dollar.

In Moscow, world financial leaders will meet for two days, as the G-20 Summit gets underway on Friday. The leaders are expected to discuss currency rates, which have shown strong fluctuations, notably the Japanese yen. The Japanese government has been criticized for its monetary policy, which has seen the yen’s value plummet over the past few months. Germany, South Korea and other countries have accused Japan of intentionally manipulating its currency in order to boost exports at the expense of its trading partners. In response, Japan says that it is trying to eliminate deflation, and has not directly targeted the yen. Meanwhile, the G-7 issued a statement earlier in the week, affirming its commitment to market-determined exchange rates. Although the G-20 will discuss the matter, given the need to reach a joint communiqué at these meetings, any statement on currencies will have to be agreeable to all of the countries attending the summit, so we may end up with a watered-down declaration.
 

USD/JPY for Friday, February 15, 2013

USD/JPY February 15 at 12:00 GMT

USD/JPY 92.66 H: 93.12 L: 92.23

USD/JPY is showing some volatility in Friday trading. On the downside, 92.53 is providing weak support. This line is likely to see more activity today, given the strong movement we are seeing from the pair. On the upside, the pair is facing resistance at 93.14. The pair tested this line earlier, but has since retracted. This is followed by resistance at 93.73.

• Current range: 92.53 to 93.14

Further levels in both directions:

• Below: 92.53, 91.94, 91.30 and 90.91
• Above: 93.14, 93.73, 94.59, 95.27, 96.06 and 97.54

OANDA’s Open Position Ratios

USD/JPY ratio is not showing any movement at present. This is not reflected in the currency pair, which has been moving upwards in Friday trading. The ratio continues to be split almost evenly, indicating uncertainty as to where USD/JPY is headed.

The yen has been fluctuating, as it displays strong movement in both directions. Will the pair push back towards the 93 level, or will we see a correction downwards? A lot of attention is being given to the volatility in exchange rates, and the markets will be eyeing the G-20 summit for any releases on this topic. We can expect the volatility in USD/JPY to continue.

USD/JPY Fundamentals

• 4:30 Japanese Revised Industrial Production. Estimate 2.5%. Actual 2.4%.
• 5:30 Bank of Japan Monthly Report.
• All Day: G-20 Meetings (Day 1).
• 13:30 US Empire State Manufacturing Index. Estimate -2.1 points.
• 14:00 US TIC Long-Term Purchases. Estimate 34.3B.
• 14:15 US Industrial Production. Estimate 0.2%.
• 14:55 US Preliminary UoM Consumer Sentiment. Estimate 74.8 points.
• 14:55 US Preliminary UoM Inflation Expectations.

*Key releases are highlighted in bold

*All release times are GMT

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