USD/JPY – Steady Ahead of BOJ Meeting

USD/JPY is quiet in Wednesday trading, as the pair trades in the mid-93 range. The markets are keeping a close eye on the Bank of Japan, which gathers for an important policy meeting late Wednesday. In the US, today’s highlight is the ADP Non-Farm Employment Change.

In Japan, Haruhiko Kuroda, who is expected to become the new governor of the BOJ later this month, testified at a confirmation hearing in Japan’s lower house of parliament. Kuroda is a proponent of strong monetary measures to kick-start the economy, and has stated that the central bank should consider purchasing more Japanese government bonds. Some analysts feel that this could cause a market bubble, with one expert warning that the BOJ’s options are limited, and that Kuroda will face a “wall of reality” when he takes the helm of the BOJ later this month. Regarding inflation, Kuroda said that the BOJ’s current policies were not strong enough to boost inflation to the government’s target of 2%. Kuroda suggested that the BOJ consider commencing its open-ended asset purchases before the scheduled start of 2014. He took pains to note that the BOJ is not targeting the yen, which has lost 12% of its value against the dollar in the past 3 months, and has antagonized Japan’s trading partners.

Back in the US, Janet Yellen, vice-chair of the US Federal Reserve, underscored the Federal Reserve’s intent to continue its current QE program and ultra-low interest rates. Yellen said that she hoped that the low interest rates would facilitate a “return to prudent risk-taking”. The current round of QE involves the purchase of $85 billion in assets each month, and critics have expressed the fear that this could lead to “asset bubbles”. However, both Fed Chair Bernanke and Yellen have argued that the benefits of a stronger recovery outweigh any such risks. Defending the Fed’s asset purchases, Yellen cited a study which found that when the central bank purchases $500 billion in bonds, unemployment drops a quarter of a percentage point within three years. Yellen’s remarks come on the heels of Bernanke’s testimony on Capitol Hill, where he also defended the Fed’s monetary policy.

USD/JPY for Wednesday, March 6,  2013

USD/JPY 93.42 H: 93.49 L: 93.01

USD/JPY/Technical 

USD/JPY is not showing much activity in Wednesday trading. On the downside, the pair is receiving support at 93.14. This line has already been breached in the Asian session, and could face more activity. Next is 92.53, which is providing strong support. On the upside, 94.59 is a strong resistance line. It has held firm since May 2010.

• Current range: 93.14 to 94.59 

Further levels in both directions:

• Below: 92.53, 91.94, 91.30, 90.91 and 90.18
• Above: 93.14, 94.59, 95.27, 96.02 and 97.52

OANDA’s Open Position Ratios

USD/JPY is quiet, showing little activity in Wednesday trading. This is line with what we are seeing from the currency pair, which has been fairly quiet as it trades in the mid-93 range. The ratio continues to be very close to an even split, indicating that trader sentiment is evenly divided as to where USD/JPY is headed.

USD/JPY is enjoying some quiet time, but that could change quickly, as the Bank of Japan gathers for a policy meeting on Thursday. As well, an unexpected reading from today’s ADP Non-Farm Payrolls could shake up the drifting we are currently seeing.

USD/JPY Fundamentals

• Tentative: Bank of Japan Monetary Policy Statement
• Tentative: Bank of Japan Overnight Call Rate. Estimate <0.10%
• 13:15 ADP Non-Farm Employment Change. Exp. 172K
• 15:00 US Factory Orders. Estimate -2.2%
• 15:30 US Crude Oil Inventories. Estimate 0.9M
• 19:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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