USD/JPY – Fluctuating as BOJ Hints at More Easing

USD/JPY is showing some volatility in Wednesday trading, after comments on Tuesday by BOJ Governor Haruhiko Kuroda that the BOJ plans further easing steps. In the Asian session, the pair climbed close to the 95 line, but has since retracted, and was trading in the low-94 range in European trading. Looking at economic releases, the Japanese Corporate Services Price Index gained 0.1% earlier this week. Although just a modest rise, it is significant as this is the first time the index has pointed to inflation since June 2012. Japanese Retail Sales will be released later on Wednesday. In the US, Tuesday’s key releases were a disappointment. The markets will be hoping for better news as US Pending Home Sales is released later today.

The new Bank of Japan Governor, Haruhiko Kuroda, continues to make headlines, as the markets seem to be weighing every word of his. Kuroda has made no secret of his plans to implement further monetary easing, although he has been short on specifics. On Tuesday , Kuroda revealed a few of his closely-held cards and stated that the BOJ will consider abolishing a rule which limits the amount of government bonds that the BOJ is permitted to purchase. Further, the central bank will discuss extending the maturity of such bonds from the current three years to five years. So we could see some important developments at next week’s BOJ policy meeting, and with it some movement in USD/JPY.

Last week’s crisis over the Cyprus bailout agreement reached a fever pitch, and there was even talk that the island country might exit the Eurozone if the ECB carried out its threat to cut off emergency funds. Although a new bailout agreement was reached on Monday, the lack of details has left the markets wary. With a lingering fear of a bank run in Cyprus, all banks throughout the country will remain closed until Thursday. The size of the haircut imposed on accounts larger than 100,000 euros is still not clear. Meanwhile, the head of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem, stated that the Cyprus deal could serve as a template for future bank restructurings in the Eurozone. Dijsselbloem later backtracked on these comments, but his ill-timed remarks have likely made holders of large deposits in other zone countries even more jittery.

With recent US numbers pointing upwards, there has been a lot of talk of the US recovery deepening. However, Tuesday’s major releases point to continued weakness in housing, consumer confidence and manufacturing. Core Durable Goods Orders posted its first decline since last September, dropping 0.5%. The markets had expected a 0.7% gain. CB Consumer Confidence failed to repeat February’s excellent numbers, dropping from 69.6 points to 59.7 points, way below the estimate of 67.9 points. New Home Sales also declined, coming in at 411 thousand, well of the forecast of 426 thousand. The US will have to produce better data from its key releases to convince the market that the recovery is deepening and that the economy is indeed headed in the right direction.

 

USD/JPY for Wednesday, March 27, 2013

Forex Rate Graph Thursday, February 14, 2013
USD/JPY March 27 at 12:00 GMT

USD/JPY  94.19 H: 94.91 L: 94.14

 

USD/JPY Technical 

S3 S2 S1 R1 R2 R3
91.48 92.53 93.14 94.59 95.27 96.02

 

USD/JPY is showing some volatility in Wednesday trading. In the Asian session, the pair climbed to 94.91, but has retracted and is trading in the 94.20 range in the European session. The pair is receiving strong support at 93.14. On the downside, 93.59 has already seen activity today and is currently a weak line of resistance. There is stronger resistance at 95.27.

  • Current range: 93.14 to 94.59

 

Further levels in both directions:

  • Below: 93.14, 92.53, 91.48 and 90.69
  • Above: 94.59, 95.27, 96.02, 97.24, 98.45

 

OANDA’s Open Position Ratios

USD/JPY is showing some movement in the direction of short positions. This activity is reflected in the current downward trend, as the yen is flexing some muscle and is close to the 94 line. Further movement in the ratio in this direction would be an indication that trader sentiment expects the yen to continue to improve against the US dollar.

USD/JPY is very busy in the Wednesday session, showing sharp movements in both directions. With both the US and Japan releasing economic data later today, we can expect more movement from the pair.

 

USD/JPY Fundamentals

  • 14:00 US Pending Home Sales. Estimate -0.3%
  • 14:30 US Crude Oil Inventories. Estimate 1.5M
  • 15:00 US FOMC Member Charles Evans Speaks
  • 15:30 US FOMC Member Eric Rosengren Speaks
  • 23:50 Japanese Retail Sales. Estimate 0.9%

 

*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.