USD/JPY – Yen Slips in Thin Trading

The Japanese yen is losing ground, as the pair trades in the mid-93 range. USD/JPY crossed the 93 line early in Monday’s European session. With the Tokyo market closed for holidays, USD/JPY is marked by thin trading, and this could lead to some volatility. In the US, Trade Balance numbers looked sharp, as the monthly deficit fell to its lowest level in two years.

Japan’s trade partners are none too pleased with the plunging yen, which has lost around 16% of its value in the past several months. The weakening yen has made their goods less competitive in international markets, reducing exports and hurting their economies. Japanese officials have consistently denied manipulating the value of the yen, arguing that aggressive monetary easing is necessary to kick-start the weak economy and combat deflation. Meanwhile, the markets are bracing for more easing measures, underscored by comments from BOJ board member Takehiro Sato, who stated that reaching the government’s target of two percent will be difficult without further action. It has become quite common for senior government officials to publicize their views on the value of the yen, and these remarks have an effect on the currency. The latest such example was Japan’s Finance Minister Taro Aso, who said the dollar‘s recent rise above the JPY 90 level was “abrupt.” This had the markets speculating if the Japanese government might take steps to slow down the yen’s sharp descent.

In the US, last week ended on a positive note, as Trade Balance data looked sharp. The monthly deficit narrowed to $38.5 billion, well below the market forecast of $45.7 billion. This was the smallest deficit since January 2011. The markets also took note of trade data in China. The Chinese economy continues to grow at a tremendous pace, and in 2012, the Asian giant surpassed the US to become the world’s biggest trading nation, as measured by total exports and imports. US exports and imports totaled $3.83 trillion, and for the first time, China beat that figure, with total trade worth $3.87 billion. This development will surely have profound economic and political implications for both China and its trading partners. China has been Japan’s biggest trading partner for the past five years, and key Chinese economic releases are likely to continue to have a significant impact on USD/JPY.

USD/JPY for Monday, February 11, 2013

USD/JPY February 11 at 11:45 GMT

93.32 H: 93.44 L: 92.45

USD/JPY Technical

USD/JPY has once again pushed higher, as the pair broke through the 93 line in Monday trading. The pair is facing resistance at 93.73. This is followed by a strong line at 94.59, which was last tested in April 2010. On the downside, there is support at 93.14. Given the volatility we are currently seeing, this line cannot be considered safe. The next support level is at 92.53.

• Current range: 93.14 to 93.73

Further levels in both directions:

• Below: 93.14, 92.53, 91.94, 91.30 and 90.91 and 90.17
• Above: 93.73, 94.59, 95.27 and 96.06

OANDA’s Open Position Ratios

The USD/JPY ratio continues to be marked by shifts in direction. As we begin the new trading week, the flow is towards long positions. This is in line with the current movement of the pair, as the dollar pushes higher against the yen. If the yen continues to lose ground, we can expect the activity in the ratio to continue as well.

The yen is back to its losing ways, after showing some improvement late last week. With Japanese senior officials hinting at further monetary easing measures, we could see the yen move towards the 94 level.

USD/JPY Fundamentals

•  18:00 US FOMC Member Janet Yellen Speaks
• 23:50 Japanese M2 Money Stock. Estimate 2.6%

*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.