USD/JPY – Rangebound as Kuroda approved as BOJ Head

USD/JPY is trading quietly in the Friday session, as the pair trades just above the 96 line. In a widely-expected move, the Japanese parliament approved the nomination of Haruhiko Kuroda as the new governor of the Bank of Japan. In economic news, the US, which has enjoyed a week of excellent fundamental releases, wraps up the trading week with two key events – Core CPI and UoM Consumer Sentiment. There are no Japanese releases on Friday.

The powerful Bank of Japan will welcome its new governor next week, as Parliament approved the nomination of Haruhiko Kuroda, who has left his position as head of the Asian Development Bank. Kurudo’s appointment will likely lead to further monetary easing in Japan, as the new governor has repeatedly said that the BOJ must take more action to raise inflation in order to breathe some life in a listless Japanese economy.  In addition to Kuroda, Parliament approved the nominations of Kikuo Iwata and Hiroshi Nakaso as deputy chiefs at the central bank. Kuroda is seen as an ally of Prime Minister Abe, who has made eliminating deflation in the economy a top priority. Kuroda has pledged to reach the BOJ’s inflation target of 2% within two years, and the markets are expecting more monetary easing as soon as Kuroda takes over. So, traders can expect quite a bit of activity from USD/JPY. The Japanese currency has plunged 20% against the dollar since November, and further monetary easing will likely result in an even weaker yen.

The markets have become accustomed to US data pointing in all directions, making it difficult to accurately assess the extent of the US recovery. Sometimes, indicators in the same sector have been mixed, which has been a source of frustration to analysts and market watchers. However, recent US numbers have looked very good, notably employment and retail sales data. No less important, positive indicators can be found in other sectors as well, as Import Prices, Business Inventories and Crude Oil Inventories all pointed upwards. The markets have reacted with a thumbs up, and this has helped the dollar post gains against the struggling euro. Has the US recovery entered a new phase? The markets will be hoping that the positive news continues, as the US releases UoM Consumer Sentiment and Core CPI to wrap up what has been an excellent week for US fundamentals.

 USD/JPY for Friday, March 15, 2013

USD/JPY 96.08 H: 96.27 L: 95.88

USD/JPY Technical 

USD/JPY is very quiet in Friday trading, as the pair hugs the 96 line. The proximate support and resistance lines (S1 and R1 above) remain in place. The pair is putting pressure on the support level of 96.02, and we could see this line fall if the yen shows any improvement. There is stronger support at 95.27.  The pair is facing resistance at 97.25, which has held firm since August 2009.  

• Current range: 96.02 to 97.24

Further levels in both directions:

• Below: 96.02, 95.27, 94.59, 93.14 and 92.53
• Above: 97.24, 98.45, 99.38 and 99.98

OANDA’s Open Position Ratios

USD/JPY ratio is continuing Thursday’s trend, with no movement to report. This lack of activity is reflected in the pair’s absence of movement, as USD/JPY drifts very close to the 96 line. The ratio is close to an even split between long and short open positions, indicating that trader sentiment remains divided as to whether the yen will continue to weaken, or will it recover some of its recent losses against the US dollar.

USD/JPY continues to be marked by narrow range trading, just above the 96 level. The pair has had a quiet week, but the yen has looked awful in March, losing 400 points against the US dollar. With a new head at the Bank of Japan, we can expect further easing very soon. Although the markets may have priced this in, look for the shaky Japanese yen to continue to falter.

USD/JPY Fundamentals

• 12:30 US Core CPI. Estimate 0.2%
• 12:30 US CPI. Estimate 0.2%
• 12:30 US Empire State Manufacturing Index. Estimate. 9.8 points.
• 13:00 US TIC Long-Term Purchases. Estimate 39.3B
• 13:15 US Capacity Utilization Rate. Estimate 79.4%
• 13:15 US Industrial Production. Estimate 0.4%
• 13:55 US Preliminary UoM Consumer Sentiment. Estimate 78.2 points
• 13:55 US Preliminary UoM Inflation Expectations

*Key releases are highlighted in bold

*All release times are GMT

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