USD/JPY – Kuroda Rhetoric Not Helping Yen Push Away Safe Haven Strength

Things did not start well for the new Bank of Japan Governor. First he was late for his first scheduled press conference, which prompted dissatisfaction in the market as JPY started to strengthen mildly, with traders speculating that the tardiness as a hint of weakness and unwillingness to face the press. Kuroda failed to prove them wrong, saying nothing new when the press conference did start. “Earliest time possible” was the phrase of choice, and the market has already heard this from PM Abe previously, and similarly we’ve heard Kuroda said the exact same phrase during his testimonies to the Lower and Upper House before his confirmation as Governor. It didn’t push USD/JPY higher then, it certainly won’t work this time round, and Yen promptly strengthened further post the press conference to trade below 95.0.

Hourly Chart

Granted a portion of the decline can be attributed to the risk aversion seen during late European and early US session. Eurostoxx and S&P500 both traded lower with disappointing PMI data from Eurozone. This development, together with continued Cyprus uncertainty pushed risk appetite lower and flight to safety flows strengthened Yen significantly. Despite cheers from US in the form of Jobless Claims and much stronger Philly Fed Index, US stocks remained depressed, which is also reflected in USD/JPY with a long tail hitting below the 19th Mar swing low.

From a technical perspective, the 76.4% Fib retracement will provide support while the 61.8% line will continue to provide resistance. Price is currently staying just above Monday’s gap, and if it falls below the current level, we would have given up all the recovery from the Gap, and potentially rekindle bearish momentum once again. Stochastic readings is showing mixed signal as readings are pointing higher, yet we’ve seen an interim peak back on 20th Mar and the same could happen again here today, which may open the doorway for price to head lower.

Daily Chart

Daily Chart shows the 38.2% Fib continuing showing good support. A breach below the support line will open up the bottom end of the consolidation range found in Feb. Stoch readings suggest that such possibility remains as readings have rebuffed a recent upturn and appears to be heading lower. If we manage to close the week below the Fib line, which is also incidentally below Monday’s gap, we could see bearish momentum acceleration as all the bullish recovery since the gap would have been negated.

Fundamentally, we will most likely see a resolution (or a failed resolution) to Cyprus banking woes. This will have a huge impact on Monday open from which we may see a gap higher or lower depending on the outcome of the negotiations. Moving back to Japan, Kuroda and his Deputy Governors will need to find some ways to continue to whelp the bears appetite. Past few weeks have been a wash for BOJ and Shinzo Abe, as the same few rhetoric about their “commitment” and “dedication” has literally run dry. Doubters still remain even from Japan on the feasibility of the 2% inflation target. Sakakibara, ex colleague of Kuroda in the Finance Ministry believe that the 2% target is bound to fail, while former BOJ member Mizuno says that Abe and Kuroda are out of this reality if they believe the 2% target is within reach. It will be a matter of time before these skepticism spreads to the rest of the market especially if Kuroda has nothing to show to rebuff these accusations, and this could spell the end for USD/JPY’s rally with safe haven flow, and the great seasonal Yen repatriation knocking at Japan’s door now.

More Links:
USD/JPY – Yen Fights Back after Recent Losses
EUR/USD – Volatile as Euro PMIs Disappoint Markets

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