USD/JPY – Under Pressure as US Faces Budget Impasse

The Japanese yen is under pressure, as UD/JPY trades in the mid-93 range in Monday’s European session. With the appointment of a new Bank of Governor last week, the markets are anticipating further monetary steps, which will likely hurt the Japanese currency. As well, the stalemate in Congress with regard to the budget crisis is bolstering the safe-haven greenback. It is a quiet day, as Monday’s only releases are speeches US Federal Reserve members.

Remember the “fiscal cliff” crisis in the US just a few months ago? This episode rattled the markets and sent currencies spinning out of control early in the new year. The US budget crisis was averted but never really went away, and the newest installment is called “sequestration”. Democrats and Republicans picked up where they left off in January, failing to reach agreement and then point fingers at each other for the impasse. This past Friday, meanwhile, $85 billion in automatic spending cuts kicked in. The core issues, spending cuts and tax reforms, have not changed and continue to divide US lawmakers along party lines. Republicans want to make major cuts to federal social programs such as Medicaide, while Democrats insists on tax hikes as part of any deficit reduction plan. The negotiations are set to continue on Capitol Hill this week, as Congress tries to break the budget impasse.

In Japan, BOJ Governor-elect Haruhiko Kuroda, spoke in public for the first time on Friday. Echoing the words of ECB head Maio Draghi, Kuroda declared that he will do “whatever it takes” to kick-start the Japanese economy. Kuroda has promised more aggressive monetary easing and highlighted his determination to reach 2% inflation. The new governor should make an excellent partner for Prime Minister Abe, who has not been shy about taking measures which have sent the yen tumbling to multi-year lows. Kuroda certainly has his work cut out for him, as last week’s Tokyo and National Core CPI numbers continue to point to deflation, which Abe has vowed to stamp out. Will the shuffle in top management at the BOJ change matters? Time will tell if a new governor at the helm of the central bank will be able to help the economy get back on its feet.

USD/JPY for Monday, March 4, 2013

USD/JPY March 4 at 11:50 GMT

USD/JPY 93.55 H: 93.65 L: 93.36

USD/JPY Technical

In Monday trading, USD/JPY continues is not showing much activity as it trades in the mid-93 range. The pair is facing resistance at 94.59. This is followed by strong resistance above the 95 line, at 95.27. On the downside, 93.14 is the next line of support. This is followed by 92.53.

• Current range: 93.14 to 94.59

Further levels in both directions:

• Below: 93.14, 9 2.53, 91.94, 91.30, 90.91 and 90.18
• Above: 94.59, 95.27, 96.02 and 97.52

OANDA’s Open Position Ratios

USD/JPY is showing little movement as we begin the new trading week. This lack of activity is reflected in the current downward trend, as USD/JPY has shown little interest in moving out of the mid-93 range. Traders should note that the ratio is very closely split, indicative of no clear bias as to where the pair is headed.

USD/JPY continues to trade quietly in the mid-93 range. The pair has been on an upward trend recently, and this could continue if the budget crisis in the US continues to percolate, as nervous investors keep close to the safe-haven US dollar. We could see the pair make push towards the 94 line.

USD/JPY Fundamentals

• 13:00 US FOMC Member Janet Yellen Speaks.
• 18:15 US FOMC Member Jerome Powell Speaks.

 *Key releases are highlighted in bold

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.