USD/JPY – Little Change as Markets Eye Debt Ceiling

USD/JPY is showing little movement early in the new trading week. The pair is trading in the low-98 range in Monday trading. The budget and debt ceiling stalemates continue in Washington, as high-level negotiations failed to produce an agreement on the weekend. There are no economic releases scheduled on Monday, as the US and Japanese markets are closed on for holidays.

Over the weekend, negotiations continued on Capitol Hill between the Republican and Democrat Senate leaders, but they failed to reach on agreement on the debt ceiling, which will be reached on Thursday. The parties have made little progress on the budget deadlock, as the government shutdown heads into its third week. A bipartisan proposal has been floated which would fund the government for six months and raise the debt limit until January 31. In the meantime, the impasse on Capitol Hill continues, and it’s hard to see how the markets can remain calm in this crisis-filled atmosphere.

The debt ceiling crisis is generating headlines the world over, as a US default on its financial obligations could lead to severe damage to the global economy. The US is being urged to get its act together, and quickly. The IMF has warned that the continuing uncertainty emanating out of Washington could lead to a world recession. ECB President Mario Draghi has also weighed in, saying that it was “unthinkable” that Congress would not reach an agreement on the debt ceiling.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Last week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. The bottom line? We may not see any QE moves by the Fed before the end of the year.

USD/JPY for Monday, October 14, 2013

USD/JPY October 14 at 11:50 GMT

USD/JPY 98.23 H: 98.35 L: 98.22

USD/JPY Technical

• USD/JPY is almost unchanged in Monday trading, as the pair continues to trade in the low-98 range.
• The pair is facing resistance at 98.43. This is a weak line which could face more pressure during the day. This is followed by resistance at 99.45.
• On the downside, USD/JPY is receiving support at 97.87. This is followed by support at 97.18.
• Current range: 97.87 to 98.43

Further levels in both directions:

• Below: 97.87, 97.18, 96.00, 95.06 and 94.20
• Above: 98.43, 99.45, 100 and 101.19

OANDA’s Open Positions Ratio

USD/JPY ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar posting gains against the yen.

USD/JPY is trading slightly above the 98 level. With the  markets closed in both countries on Monday, we’re unlikely to see much movement, unless there is a breakthrough in the debt ceiling crisis.

USD/JPY Fundamentals

There are no US or Japanese releases on Monday.

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