USD/JPY – No Change as Markets Eye ECB

The currency markets are in a holding pattern on Thursday, as the ECB meets for a crucial policy meeting later in the day. Most analysts are predicting that the ECB will lower rates. USD/JPY is keeping a low profile, as the pair was trading in the mid-97 range in Thursday’s European session. In economic news, US releases continued to disappoint, as ADP Non-Farm Payrolls and ISM Manufacturing PMI missed their estimates. The US will be releasing two key events today- Trade Balance and Unemployment Claims. On Wednesday, In Japan, the BOJ released minutes of its most recent meeting, and Monetary Base recorded an increase. There are no Japanese releases on Thursday.

Will he or won’t he? This question is looming large, as the markets anxiously wait to see whether Mario Draghi and his colleagues at the ECB will press the trigger and lower in interest rates for the first time since last July. The markets are expecting the ECB to lower rates from 0.75%  to 0.50%. The Eurozone continues to stagnate with poor releases, as highlighted by a record high for Eurozone Unemployment Rate, which edged to 12.1%, up from 12.0%. Whether the ECB takes action or leaves the rate as is, we could be in for some volatility from the euro later today.

Anyone who was expecting some dramatic news out of the Fed on Wednesday was sorely disappointed. The FOMC policy statement on Wednesday said little, as the Fed basically noted that it wasn’t willing to take further steps, despite signs of weakness in the US economy. There was no indication that the Fed would make any changes (higher or lower) to its current QE program of purchasing $85 billion in assets each month. The Fed did criticize the government’s economic policy, stating that current fiscal policy was restraining economic growth. Meanwhile, the continues to struggle with weak numbers, and Wednesday’s ADP Non-Farm Payrolls was a bust. The key indicator dropped to 119 thousand, nowhere near the forecast of 154 thousand. ISM Manufacturing PMI came in at 50.7 points, missing the estimate of 51.0 points. We’ll get a better picture of the US employment picture as the US releases Unemployment Claims on Thursday, followed by official US Non-Farm Payrolls on Friday.

Under the new leadership of Governor Haruhiko Kuroda, the Bank of Japan has been pushing full steam ahead with aggressive monetary easing, but it seems that not all policy makers share his enthusiasm. The BOJ released the minutes of its most recent policy meeting. The minutes pointed to concern by some policy board members that the increase in QE could have a negative impact on financial markets and discourage bank lending. However, given that Prime Minister Abe is a strong supporter of more easing, we can expect the BOJ to continue its present QE program until it sees more inflation in the Japanese economy.

USD/JPY for Thursday, May 2, 2013

USD/JPY 97.56 H: 97.59 L: 97.09

USD/JPY Technical

USD/JPY is very quiet in Thursday trading, as the proximate resistance and support levels remain in place (R1 and S1 above). On the downside, the pair continues to receive support at 97.24. The next support level is at 96.03, protecting the 96 level. The pair faces resistance at 98.45. This is followed by resistance at 99.57.

• Current range: 97.24 to 98.45

Further levels in both directions:

• Below: 97.24, 96.03, 95.27 and 94.19
• Above: 98.45, 99.57, 100, 100.54 and 101.81

OANDA’s Open Position Ratios

USD/JPY continues to show little movement in Thursday trading. This is reflected in the pair, which has shown almost no movement. Long positions make up a solid majority in the ratio, indicating that trader sentiment is strongly biased towards the dollar pushing higher at the expense of the yen.

The yen continues to trade in the mid-97 range. We could see some movement later today, as the US releases key employment data. The Fed statement did not shake up the markets, but the opposite is likely to be the case as the ECB sets interest rates later today.

USD/JPY Fundamentals

• 11:30 US Challenger Job Cuts.
• 12:30 US Trade Balance. Estimate -42.1B.
• 12:30 US Unemployment Claims. Estimate 346K.
• 12:30 US Preliminary Non-Farm Productivity. Estimate 1.8%.
• 12:30 US Preliminary Unit Labor Costs. Estimate 0.8%.
• 14:30 US Natural Gas Storage. Estimate 27B.

*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.