The US dollar took a hit from the Japanese yen on Wednesday, following the surprise announcement by the Federal Reserve that it would not begin tapering QE. USD/JPY dropped about a cent following the news, but the US dollar quickly recovered, thanks to some solid releases on Thursday, highlighted by Unemployment Claims. The pair is trading quietly in the mid-99 range in Friday’s European session. In Japan, Trade Balance improved sharply from -0.94 trillion dollars in July to -0.79 trillion in August, surpassing the estimate of -0.83 trillion. There are no economic releases out of Japan or the US on Friday, but we could see some movement from USD/JPY, as several Federal Reserve policymakers will be speaking, including FOMC Member James Bullard, who will address an event in New York City. As well, BOJ Governor Haruhiko Kuroda addresses a conference in Tokyo.
The markets continue to try and recover their composure after the US Federal Reserve stunned the markets in deciding not to taper QE at its policy meeting on Wednesday. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/month by as much as $15 billion/month. However, the Fed decided to stay the QE course for now, stating that the US economic data was not strong enough to warrant QE tapering at this time. The Fed also downgraded its forecast for the economy, estimating GDP growth for 2013 at 2.0-2.3%, down from 2.3-2.6% in an earlier forecast. It also lowered its outlook for 2014 from 2.9%-3.1%, down from 3.0-3.5%. USD/JPY was up about a cent following the Fed announcement.
Overshadowed by the FOMC Statement were some excellent US releases on Thursday. Unemployment Claims came in at 309 thousand, well below the estimate of 331 thousand. Existing Home Sales rose to 5.48 million, crushing the estimate of 5.27 million, and posting its best level in over three years. The Philly Fed Manufacturing Index rocketed from 9.3 to 22.3 points, its best showing since May 2011. Perhaps if we’d seen this kinds of numbers a week or two ago, the Fed might have introduced QE tapering. The strong numbers helped the US dollar wipe out the losses it sustained on Wednesday.
In Japan, BOJ Governor Haruhiko Kuroda sounded upbeat about the Japanese economy on Friday, saying that improving economies in the US and Europe would bolster Japanese exports and output and lead to an increase in capital expenditure. The BOJ has embarked on a radical monetary platform, which has included sharp increases to the money base in order to achieve 2% inflation. After years of deflation which have hobbled the economy, there are signs of inflationary trends and stronger economic data, although the 2% inflation target will take some time to reach.
USD/JPY for Friday, September 20, 2013
USD/JPY September 20 at 10:30 GMT
USD/JPY 99.33 H: 99.56 L: 99.17
- USD/JPY is showing little movement on Friday, as the pair trades in the mid-99 range.
- The pair is testing resistance at 99.45. This line could fall if the US dollar resumes its upward movement. This is followed by resistance at the all-important 100 level.
- On the downside, USD/JPY is receiving support at 98.43. This line has some breathing room as the pair trades at higher levels. There is stronger support at 97.83.
- Current range: 98.43 to 99.45
Further levels in both directions:
- Below: 98.43, 97.83, 97.18 and 96.20
- Above: 99.45, 100, 100.85, 101.66 and 102.53
OANDA’s Open Positions Ratio
USD/JPY ratio remains unchanged in Friday trading. This is reflected in the pair’s current movement, which is trading in a narrow range. The ratio is made up of a solid majority of long positions, indicative of a strong trader bias towards the dollar moving to higher ground.
USD/JPY has shown a lot of volatility in the past few days, but has settled down in Friday trading. We could see the pair continue to drift right into the weekend.
- 2:30 BOJ Governor Haruhiko Kuroda Speaks
- 16:30 US FOMC Member Esther George Speaks
- 16:40 US FOMC Member Daniel Tarullo Speaks
- 16:55 US FOMC Member James Bullard Speaks
*Key releases are highlighted in bold
*All release times are GMT
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