USD/JPY – BOJ Hints at Further Easing

USD/JPY has edged downwards in Thursday trading. The pair moved lower in the Asian session, and this continued in European trading, as USD/JPY dipped below the 94 line. The pair has bounced higher, and was trading in the low-94 range. The yen managed to shrug off disappointing Japanese Retail Sales numbers on Thursday.  The indicator declined 2.3%, its sharpest drop since December 2011. The markets will be hoping for better news from a host of releases later on Thursday, including Tokyo Core CPI and Household Spending. The BOJ meets for a policy meeting next week, and new BOJ Governor Haruhiko Kuroda dropped some hints that further easing is in the works. In the US, New Home Sales was a disappointment, posting a decline. Today’s highlight is Unemployment Claims.

The Bank of Japan does not meet for a policy meeting until late next week, but the new BOJ 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 meeting, and with it some movement in USD/JPY.

After a frantic week of negotiations over a bailout between Cyprus, the EU and the IMF, a bailout agreement was announced on Monday, but the markets remain jittery. The agreement has not brought calm to the small Eurozone member, which has been at the center of a financial crisis over the EUR10 billion bailout. The country’s banks are scheduled to reopen on Thursday, after being closed for business for almost two weeks. Fearing a bank run, the government has imposed strict controls, including limiting withdrawals to 300 euros a day, and a ban on cashing checks. The size of the haircut which will be imposed on accounts of over 100,000 euros is still unknown, and there are rumors that these depositors could lose up to 40% of their savings. The euro has taken a hit over the crisis, dropping over two cents against the dollar this week.

There has been a lot of talk of the US recovery deepening, but this week has been a disappointment, as economic releases point to continued weakness in housing, consumer confidence and manufacturing. The markets had hoped for strong housing numbers this week, but two major housing releases were weak. New Home Sales fell sharply from 437 thousand to 411 thousand, well below expectations. Pending Home Sales also looked weak, declining 0.4%. The forecast stood at -0.3%. The housing market is a critical sector of the US economy, and there will have to be significant improvement in this sector if the recovery is to take root.

 

USD/JPY for Thursday, March 28, 2013

Forex Rate Graph Thursday, February 14, 2013
USD/JPY March 28 at 11:50 GMT

USD/JPY 94.31 H: 94.43 L: 93.87

 

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

 

In Thursday trading, USD/JPY is showing some movement, and dipped below the 94 line before recovering. The proximate resistance and support levels remain in place (R1 and S1). The pair is facing resistance at 94.59. This is a weak line, and could face more activity if the yen loses any ground. This is followed by 95.27, a strong line of resistance. On the downside, there is support at 93.14. This is followed by support at 92.53.

  • 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 movement in the direction of long positions. This activity is not reflected in the pair’s current movement, which has showed almost net movement in Thursday trading. The majority of positions in the ratio are long, indicating a bias towards the dollar improving against the yen.

USD/JPY has been fairly quiet this week, as the pair has not reacted to mostly disappointing US data. We could some increased movement as Japan releases a string of data later on Thursday. 

 

USD/JPY Fundamentals

  • 12:30 US Unemployment Claims. Estimate 340K
  • 12:30 US Final GDP. Estimate 0.5%
  • 12:30 US Final GDP Price Index. Estimate 0.9%
  • 13:45 US Chicago PMI. Estimate 56.5 points
  • 14:30 US Natural Gas Storage. Estimate -85B
  • 23:15 Japanese Manufacturing PMI
  • 23:30 Japanese Household Spending. Estimate 0.4%
  • 23:30 Japanese Tokyo Core CPI. Estimate -0.6%
  • 23:30 Japanese National Core CPI. Estimate -0.4%
  • 23:30 Japanese Unemployment Rate. Estimate 4.2%
  • 23:50 Japanese Preliminary Industrial Production. Estimate 2.6%

 

*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.