USD/JPY – Under Pressure Ahead of G-20 Meeting

The Japanese yen continues to trade at high levels, as USD/JPY pushed past the 98 line in Wednesday’s Asian session. The markets are anxiously awaiting the G20 meeting in Washington, which takes place Thursday and Friday. In economic news, US key numbers continue to sag, as Building Permits and Core CPI both missed their estimates. In Japan, Consumer Confidence came in at 44.8 points, well below the estimate of 46.7 points. Trade Balance will be released later on Wednesday. Today’s US highlight is Crude Oil Inventories.

The G20 Meeting will start on Thursday in Washington, and we can bet that the slumping yen will be high on the agenda as finance ministers and central bankers huddle together. Japan’s trading partners are very unhappy about Japan’s monetary actions, which has made the yen much more competitive and hurt their exports. However, the Japanese government has moved full steam ahead with aggressive easing steps, which it says are aimed at stamping out deflation, not manipulating the value of the yen. The yen has now slid 15% against the US dollar in 2013, and last week came very close to the psychologically significant 100 level.

In the US, the picture is not a pretty one, as a long streak of weak economic numbers, dating back to March, continues. Building Permits dropped from 0.95 million to 0.90 million, missing the forecast of 0.94 million. Core CPI posted a weak gain of 0.1%, falling below the estimate of 0.2%. There was better news from US Housing Starts, which hit a multi-year high, improving to 1.04 million. The estimate stood at 0.93 million. The weak data points to trouble in the US economy, and if the streak continues, is bound to raise red flags in the markets about the extent of the US recovery.

The Cyprus bailout crisis, which rattled markets worldwide, may not be in the headlines lately, but the crisis is by no means behind us. Last month, the EU and IMF agreed to provide EUR 10 billion, with Cyprus kicking in another EUR 7 billion. However, the original deal collapsed after Cyprus balked at taxing every bank deposit in the country, following a huge outcry on the island. The bailout has now ballooned to EUR 23 billion, with Cyprus agreeing to pay EUR 13 billion. The country plans to raise these funds through a combination of taxes on uninsured depositors, tax hikes and spending cuts. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while those in Laiki Bank, which will be winded down, could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will be slashed by 13% in 2013 and 2014, and steering the economy through choppy waters promises to be a serious challenge to the Cypriot government.

USD/JPY for Wednesday, April 17, 2013

USD/JPY 97.88 H: 98.43 L: 97.55

USD/JPY remains under pressure in Wednesday trading, as the pair tests the 98 line. On the upside, there is resistance at 98.45. This is followed by resistance at 99.57, which is protecting the 100 level.  On the downside, 97.24 continues to provide support. The next support level is at 96.03. 

• Current range: 97.24 to 98.45

Further levels in both directions:

• Below: 97.24, 96.03, 95.27 and 94.59
• Above: 98.45, 99.57, 100, 100.54 and 101.81

OANDA’s Open Position Ratios

USD/JPY is showing some movement in the direction of long positions. This activity is not reflected in the current trend, as the pair is not showing much activity. Long positions make up a solid majority of the open positions in the ratio, indicative of a strong bias towards the US dollar making gains at the expense of the yen.  

The yen remains under pressure, trading close to the 98 level. There is little in the way of economic releases on Wednesday, so we could see the USD/JPY continue to trade quietly.

USD/JPY Fundamentals

• 5:00 Japanese Consumer Confidence. Estimate 46.7 points. Actual 44.8 points
• 13:30 US FOMC Member James Bullard Speaks
• 14:30 US Crude Oil Inventories. Exp. 1.2M
• 16:00 US FOMC Member Eric Rosengren Speaks
• 18:00 US Beige Book
• 20:00 US Treasury Secretary Jack Lew Speaks

 *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.