USD/JPY – Edging Higher After Weak US, Japan Data

The Japanese yen is showing some movement in the Tuesday session. USD/JPY dropped into the mid-92 range in the Asian session, but has since bounced back above the 93 line, and was trading in the low-93 range. Japanese and US releases both disappointed the markets. Japanese Average Cash Earnings declined for the third time in four readings. In the US, ISM Manufacturing PMI looked weak, falling well below expectations. Tuesday’s major release out of the US is Factory Orders.

US releases were a big disappointment last week, with poor data across a range of sectors, including housing and employment. The new week did not start well, as the ISM Manufacturing PMI dropped sharply from 54.2 points to 51.3 points, way below the estimate of 54.2 points. If this week continues in a downward trend, we could see a negative reaction from the markets, as concerns rise about the US recovery. The major events for this week include: ISM Non-Manufacturing PMI and key employment numbers.

The markets are waiting as the Bank of Japan meets for a policy meeting on Thursday. This will be the first meeting under the helm of the new BOJ Governor, Haruhiko Kuroda. He has made no secret of his staunch support for further aggressive monetary easing, although he has been short on specifics. Last week, 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 this week’s meeting, and with it some movement in USD/JPY.

Over in Europe, the markets continue to cast a worried eye at Cyprus. The bailout agreement worth EUR13 billion may have been signed, but the drama and uncertainty in the small island country continue. Capital controls are still in place in Cyprus, as the government takes strict measures in order to head off a run on the banks by nervous deposit holders. Under the agreement, bank deposits under EUR100,000 will be left untouched, but there is confusion and uncertainty as to what will happen to larger accounts, which have been frozen. There is plenty of speculation about what will happen, with rumors that these accounts could get hit with huge taxes of up to 40%. As developments unfold, we could see some sharp reactions from the currency markets. 

USD/JPY for Tuesday, April 2, 2013

USD/JPY 93.24 H: 93.35 L: 92.57

In Tuesday trading, USD/JPY has crossed above the 93 line. USD/JPY is receiving support at 93.14. This is a weak line, and could see further activity if the yen shows any strength against the dollar. We find a stronger support level at 92.53. On the upside, the pair faces resistance at 94.59. This line has strengthened as the pair trades close to the 93 level. 

• 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 ratio continues to show a solid majority of long positions. This is indicative of a bias in trader sentiment towards the US dollar posting gains against the yen. This is in line with the pair’s current activity, as the dollar has posted some modest gains against the yen.

After some strong gains to kick of the week, the yen has lost some ground against the US dollar. With the markets anxiously awaiting the BOJ policy meeting on Thursday, we could see some movement from the pair until then.

USD/JPY Fundamentals

• 1:30 Japanese Average Cash Earnings. Estimate -0.1%. Actual -0.7%
• 14:00 US Factory Orders. Estimate 3.1%
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.1 points
• All Day: US Total Vehicle Sales. Estimate 15.3M

*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.