USD/JPY – Steady as Cyprus Crisis Resolved

USD/JPY has started the new trading week quietly, as the yen trades in the high-94 range. There is only one economic release today, which is Corporate Services Price Index. This inflation index is an important test of the government and Bank of Japan’s strong attempts to eliminate deflationary trends in the Japanese economy. The index has posted readings below zero since June 2012, indicating persistent deflation in the business sector. The estimate for the upcoming release stands at 0.0%. Will the index surprise the markets and climb into positive territory? In the US, Federal Reserve head Bernard Bernanke will join up with Bank of England head Mervyn King at a panel discussion at the London School of Economics. The markets will be listening carefully for any hints as to what moves the Fed or BOE might make with regard to monetary policy.

There was good news out of Brussels on Monday morning, as Cyprus and its international creditors reached an agreement on a bailout agreement for the island country. The markets had anxiously followed the drama in Cyprus over the course of the week. Responding to Cyprus’s rejection of a bailout agreement which included a bank levy on all deposits, the ECB had threatened to cut off all emergency aid to banks, which would have resulted in the collapse of the country’s banking sector and possibly leading to a Euroexit by the small island country. There was a fear that a failure to reach a deal would lead to a financial market selloff which could spread to the Eurozone. In the end, Cyrpus will receive EUR10 billion in rescue funds, and the second largest bank in Cyprus, Laiki Bank, will be winded down. All deposits below EUR100,000 will be transferred to the Bank of Cyprus and “fully guaranteed”, but deposits over that sum will be frozen and used to pay off Laiki’s debts and recapitalize the Bank of Cyprus. According to the EU, this will raise EUR4.2 billion. The agreement is sure to be unpopular in Cyprus, and will mean the loss of thousands of jobs as Laiki Bank is winded down.

Bank of Japan Governor Haruhiko Kuroda was in the spotlight late last week, as he hosted his first press conference since becoming governor just a few days ago. The world’s third largest economy has been stagnating for years, and Kuroda reiterated his goal of eliminating deflation and reaching the BOJ’s inflation target of 2% within two years. However, Kuroda shied away from offering any specifics on what steps the BOJ was planning. Critics of the Kuroda, including former BOJ Governor Masaaki Shirakawa, have expressed doubts that monetary policy alone will be enough to kick-start the Japanese economy. In any event, no news was good news for the yen, which has rallied against the US currency over the past two days. Analysts expect Kuroda to announce new monetary easing at the BOJ’s next policy meeting in April, so we can expect the yen to remain under pressure. 


USD/JPY for Monday, March 25, 2013

Forex Rate Graph Thursday, February 14, 2013
USD/JPY March 25 at 11:20 GMT


USD/JPY 94.77 H: 94.96 L: 94.59


S3 S2 S1 R1 R2 R3
92.53 93.14 94.59 95.27 96.02 97.24


In Monday trading, USD/JPY is trading quietly, as the proximate resistance and support levels remain intact from the weekend. (R1 and S1). The pair is receiving weak support at 94.59. This line could be tested if the yen posts any gains. There is a stronger support level at 93.14. On the upside, 95.27 continues to provide resistance. This is followed by resistance at 96.02.

  • Current range: 94.59 to 95.27


Further levels in both directions:

  • Below: 94.59, 93.14, 92.53 and 91.48
  • Above: 95.27, 96.02, 97.24, 98.45 and 99.38


OANDA’s Open Position Ratios

USD/JPY continues to point to movement towards long positions. The ratio showed movement in this direction for most of last week, and this has resulted in a commanding majority for open long positions. This indicates a bias towards the dollar posting gains against the yen, which we have not seen since early March, when the USD/JPY briefly broke above the 96 line.

USD/JPY is subdued as we start the new trading week. Monday’s only economic data is the Corporate Services Price Index. If this business index points to inflation, this would be an important development and could result in USD/JPY breaking upwards.


USD/JPY Fundamentals

  • 4:15 US FOMC Member William Dudley Speaks in New York
  • 17:15 US Fed Chair Bernard Bernanke Speaks in London
  • 23:50 Japanese CSPI. Estimate 0.0%


*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.
Kenny Fisher

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