USD/JPY – Yen Moves Higher as Markets Eye BOJ Minutes

USD/JPY started the week by pushing above the 100 line. However, the pair could not sustain this upward momentum and retracted. Early in the North American session on Tuesday, the pair is trading in the mid-99 range. The Japanese markets were closed for a holiday on Monday, and there is only one release scheduled for Tuesday – the BOJ’s Monetary Policy Meeting Minutes. In the US, today’s major event, Core CPI, posted a second straight gain of 0.2%, matching the forecast. CPI climbed to a four-month high, beating the estimate.

We have seen improved economic data out of Japan recently. Manufacturing, housing and retail sales are all pointing upwards. No less important are inflation figures, which have risen modestly. The Japanese government and BOJ are waging an all-out battle to eliminate deflation, which has hobbled the economy for years. At its policy meeting last week, the Bank of Japan sounded cautiously optimistic about the economy, and reiterated that it would use quantitative and qualitative monetary easing to achieve an inflation level of 2% .The BOJ did not adjust its aggressive monetary policy, which entails doubling the monetary base to JPY 270 trillion by the end of 2014. The extreme monetary policy has also had a tremendous negative impact on the yen, as the Japanese currency has fallen to multi-year lows. Analysts will be carefully combing through the minutes of the BOJ’s last policy meeting, and we could see some volatility from USD/JPY after the release of this market-mover.

Last week, the yen posted sharp gains at the expense of the dollar, following the release of the minutes from the Fed’s last policy meeting, as well as dovish remarks from Fed chair Bernard Bernanke. The minutes indicated that Federal Reserve policymakers remain deeply divided over when to scale down the current round of QE, whereby the Fed purchases $85 billion in assets each month. About half of the Fed policymakers favor scaling down QE before the end of 2013, while others feel that the employment market is still too fragile for the Federal Reserve to take any action. The dollar continued to lose ground as Federal Reserve chair Bernanke gave a speech in which he said that the Fed would maintain a loose monetary policy for the foreseeable future, due to low levels of inflation and a high US unemployment rate.  If US employment numbers show further improvement, the Federal Reserve will again be under pressure to taper QE. With Bernanke scheduled to testify on Wednesday before a congressional committee, we could see some further volatility in the currency markets.

 

USD/JPY for Monday, July 16, 2013

Forex Rate Graph 21/1/13
USD/JPY July 16 at 13:05 GMT

USD/JPY 99.47 H: 100.03 L: 99.23

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
97.83 98.43 99.45 100.00 100.85 101.66

 

USD/JPY has improved on Tuesday. In the European session the pair touched a low of 99.24 before moving back up to the mid-99 range. On the downside, USD/JPY is currently testing the 99.45 line. There is stronger support at 98.43. On the upside, the round number of 100 continues to be busy this week, and is providing weak support. This is followed by resistance at 100.85.

Current range: 99.45 to 100.00

 

Further levels in both directions:

  • Below: 99.45, 98.43, 97.83, 97.18 and 0.9620
  • Above: 100.00, 100.85, 101.66, 102.52 and 103.22

 

OANDA’s Open Positions Ratio

USD/JPY ratio is showing very little movement in Tuesday trading. USD/JPY is active, as the yen has come out strong and posted against the dollar. If the pair continues to be busy, we can expect the ratio to follow suit and swing  back into action.

The yen has shown improvement on Tuesday, giving the important 100 line some breathing room on the upside. We could see some volatility from the pair later on, as the BOJ releases the minutes from its most recent policy meeting.

USD/JPY Fundamentals

  • 12:30 US Core CPI. Estimate 0.2%. Actual 0.2%. 
  • 12:30 US CPI. Estimate 0.3%. Actual 0.5%.
  • 13:00 US TIC Long-Term Purchases. Estimate 14.3B. Actual -27.2B.
  • 13:15 US Capacity Utilization Rate. Estimate 77.8%. Actual 77.8%.
  • 13:15 US Industrial Production. Estimate 0.2%. Actual 0.3%.
  • 14:00 US NAHB Housing Market Index. Estimate 51 points.
  • 18:15 US FOMC Member Esther George Speaks.
  • 23:50 BOJ Monetary Policy Meeting Minutes.

 

*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.