USD/JPY – Markets Await G-20 Meeting

The Japanese yen is again losing ground, as the US dollar tries to recover from its losses on Wednesday. USD/JPY broke above the 94 level on Tuesday, but could sustain the drive, and is back in the 93.70 range. In the US, the Federal Budget Balance looked good, as the US government posted a rare surplus for January. Japanese indicators were also positive, as Tertiary Industry Activity easily beat the forecast, recording its strongest gain in a year. The Corporate Goods Price Index came within expectations, but still posted a decline. Today’s highlights are from the US, which will release Retail Sales and Core Retail Sales later in the day. Japan will release Preliminary GDP data late Wednesday.

Japan posted some solid business data, as the Tertiary Industry Activity jumped 1.4%, its best reading since last February. The market estimate stood at 0.8%. The CGPI declined by 0.2%. Although the indicator beat the estimate of 0.3%, it underscores the fact that the Japanese economy continues to be hobbled by deflation, despite the government’s aggressive easing measures. No doubt that the government will not be pleased with this reading, and we can expect further easing steps, which will likely push the yen to new lows. In the US, the markets were pleasantly surprised as the Federal Budget Balance easily exceeded the estimate, and posted a surplus of $2.9 billion. The markets had anticipated a deficit of $4.6 billion.

The G-20 Summit takes place later this week, and an important topic on the agenda will be the issue of exchange rates, with the euro posting sharp against the yen and the dollar. There is mounting concern about “currency wars”, as countries are increasingly relying on monetary policy to kick-start their flagging economies.  The Institute of International Finance, which is comprised of leading banks and financial institutions, has urged the G-20 to take steps to avoid the “possible discord on exchange rates”. The yen has been in free-fall losing about 16% of its value against the dollar in the past three months. Japan’s trading partners are alarmed by the sinking yen, but the Japanese government has been brushing off international criticism of its monetary policies. Japanese Finance Minister Taro Aso stated that the monetary easing measures are needed to deal with deflation and the government has not actively devalued the yen. Anyone expecting fireworks at the G-20 over currency manipulations is likely to be disappointed –  given the need to reach a consensus, analysts expect any statement on currencies to be mild in nature.

USD/JPY for Wednesday, February 13, 2013

USD/JPY February 13 at 12:50 GMT

USD/JPY 93.64  H: 93.78  L: 92.82

USD/JPY Technical

USD/JPY broke above the 94 line on Tuesday, but was unable to sustain the upward move, and pulled back. The pair is testing the 93.73 level, and we can expect more activity around this line. There is stronger resistance at 94.59. On the downside, the next line of support is 93.14. Given the continuing volatility of the pair, this line cannot be considered safe. This is followed by stronger support 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
• Above: 93.73, 94.59, 95.27, 96.06 and 97.54.

OANDA’s Open Position Ratios

The USD/JPY ratio continues to fluctuate, and has shifted directions. We are currently seeing a strong move towards long positions. This activity is reflected in the currency pair, which continues to threaten the 94 line. With the pair pushing to higher levels, we can expect the ratio movement to continue.

The yen continues to fluctuate, and we could USD/JPY again test the 94 level.  Will the upward momentum continue? With Japanese senior officials hinting at further monetary easing measures and Japanese indicators continuing to point to a sluggish economy, the hapless yen has more room to drop.

USD/JPY Fundamentals

• 2:00 US President Obama delivers State of the Union Address.
• 13:30 US Core Retail Sales. Estimate 0.1%.
• 13:30 US Retail Sales. Estimate 0.1%.
• 13:30 US Import Prices. Estimate 0.8%.
• 15:00 US Treasury Secretary Jack Lew Speaks.
• 15:00 US Business Inventories. Estimate 0.3%.
• 15:30 US Crude Oil Inventories. Estimate 2.4M.
• 16:10 US FOMC Member James Bullard Speaks.
• 18:00 US 10-year Bond Auction.
• 23:50 Japanese Preliminary GDP. Estimate 0.1%.
• 23:50 Japanese Preliminary GDP Price Index. Estimate -0.5%.

*Key releases are highlighted in bold

*All release times are GMT

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