USD/JPY – Yen Fights Back after Recent Losses

In Thursday’s European session, the Japanese yen has rebounded nicely from losses sustained in Wednesday trading. USD/JPY was trading in the low-95 range. In economic news, the Federal Reserve maintained its monetary policy, leaving unchanged current levels of interest rates and asset purchases. In Japan, the Trade Deficit widened, and All Industries Activities also disappointed. The markets will  be paying close attention as the new Bank of Japan governor, Haruhiko Kuroda, hosts his first press conference in his new position. In the US, there are three major releases scheduled on Thursday – Unemployment Change, Existing Home Sales and Philly Fed Manufacturing Index.

In Japan, the major event of the day takes place at the BOJ, as Haruhiko Kuroda hosts his maiden press conference as Governor of the BOJ. The markets are expecting Kuroda to repeat that he plans to implement more aggressive monetary easing steps in order to eliminate deflation and kick-start the Japanese economy. Kuroda is seen as an ally of Prime Minister Shinzo Abe, who has declared combating deflation one of his highest priorities. The Japanese currency has already lost 20% against the US dollar, which has been a boon for Japanese exports. Although economic indicators continue to point to deflation in the economy, GDP was up slightly in Q4 of 2012, raising hopes that the government’s aggressive easing policy is starting to pay dividends. In economic news, Japanese releases did not impress. The Trade Deficit ballooned to JPY1.09 trillion from 0.68 trillion, missing the estimate of JPY1.01 trillion. All Industries Activities also looked weak, posting a decline of 1.4%. The estimate stood at -1.1%.

Cyprus may be one of the Eurozone’s lightweights, but it continues to be in the financial headlines. What was supposed to be a routine bailout package for the island country has ballooned into a full-blown Eurozone financial crisis. The reason was a controversial bank levy provision in the agreement, which sent the currency markets spinning early in the week. This tax, which was aimed at all bank deposit holders, was intended to raise 5.8 billion euros, which would be a condition for Cyprus receiving the bailout funds. Cypriots were outraged, and on Tuesday, the Cypriot parliament voted overwhelmingly against the bailout. The government was not happy with the deal either, but had warned that rejecting the agreement could lead to a collapse of the nation’s banking sector. Meanwhile, the Eurozone is scrambling to salvage the bailout deal. German Chancellor Angela Merkel said she was ready to work with Cyprus to find a solution, and officials from the EU and IMF, who are the creditors behind the bailout, are in Cyprus for talks with the Cypriot government to discuss ways of making the bailout more palatable.

In the US, there were no surprises from the US Federal Reserve, which announced that it was maintaining interest rates as well as the current round of asset purchases. The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. There had been talk of the Fed modifying its monetary policy, with the US economy shown signs of improvement, such as lower unemployment and stronger consumer spending. However, Fed chief Bernanke said that the US labor market was still weak and also noted concern about recent tax increases and federal spending cuts.

USD/JPY for Thursday, March 21, 2013

USD/JPY 95.20 H: 96.03 L: 94.82

USD/JPY has weakened in Thursday’s  European session, as the pair has dropped to the low-95 range. There is weak resistance at 95.27, and this line could see further activity. The next line of resistance, at 96.02, is stronger. On the downside, 94.59 is providing support. This is followed by 93.14, which has held steady since early March.

• Current range: 95.49 to 95.27

Further levels in both directions:

• Below: 94.59, 93.14, 92.53 and 91.48
• Above: 95.27, 96.02, 97.24, 98.45 and 99.38

OANDA’s Open Position Ratios

USD/JPY ratio is not showing any movement in Thursday trading. This lack of activity is not reflected in the currency pair, as the yen has posted strong gains against the US currency. If USD/JPY continues to be active, we can expect to see movement in the ratio as well. 

The yen has flexed some muscle, as USD/JPY trades in the low-95 range. We could see more volatility from the pair, as BOJ Governor Kuroda gives his first press conference. As well, there are three key US releases later in the day. 

USD/JPY Fundamentals

• 4:30 Japanese All Industries Activity. Estimate -1.1%. Actual -1.4%
• 12:30 US Unemployment Claims. Estimate 343K
• 13:00 US Flash Manufacturing PMI. Estimate 55.1 points
• 13:00 US HPI. Estimate 0.7%
• 14:00 US Existing Home Sales. Estimate 5.02M
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.6 points
• 14:00 US CB Leading Index. Estimate 0.3%
• 14:30 US Natural Gas Storage. Estimate -70B

*Key releases are highlighted in bold

*All release times are GMT

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