USD/ JPY – Unsteady as Pair Tests 96 Level

USD/JPY is busy in Wednesday trading, and has shown movement in both directions. The pair continues to test the 96 level, which has seen activity throughout the week. There are a host of US releases today, highlighted by Retail Sales and Core Retail Sales. No Japanese releases are scheduled.

USD/JPY remains under pressure, as the markets expect the Bank of Japan to implement further monetary easing measures. These sentiments were reinforced following tough comments from the incoming BOJ head. During confirmation hearings, Haruhiko Kuroda declared that he would do “whatever it takes” to beat deflation and reach the government’s inflation target of 2.0%. The incoming governor reiterated that he is confident that an effective monetary policy could defeat deflation, which continues to weigh heavily on the Japanese economy. Kuroda noted that the current amount of asset buying by the BOJ will not achieve the 2.0% inflation goal. There are media reports that Kuroda may start implementing additional easing immediately upon assuming office next week, rather than wait until the BOJ’s next policy meeting in April. There were no surprises as the BOJ released the minutes of its February meeting, at which the central bank maintained its monetary policy. Some members stated they were in favor of buying Japanese Government Bonds with longer remaining maturities if additional monetary easing is needed in the future.

In the US, there are hopes that the recovery is strengthening, following excellent employment numbers last week. Employment Change shot higher, and the Unemployment Rate dropped to 7.7%, its lowest level since 2008. The improving economy has led to speculation that the Fed might end the current round of QE, which involves the purchase of $85 billion in assets each month, earlier than expected. In one possible scenario, the Fed would let mature the trillions of dollars in securities they have purchased, rather than saturate the market with a huge amount of securities. The US economy has been bumpy, and has not responded all that well to the Fed’s massive purchase of assets. This “new exit” strategy could take place as early as June, and would be a dramatic shift in the Federal Reserve’s current monetary policy.

 USD/JPY for Wednesday, March 13, 2013

USD/JPY 95.76  H: 96.10 L: 95.45

USD/JPY Technical 

In Wednesday trading, USD/JPY is showing movement, but the proximate support and resistance lines remain in place  (S1 and R1 above). In the Asian session ,the pair touched above the 96 level, but then retracted. The pair is facing weak resistance at 96.02. Look for this line to remain under pressure. The next line of resistance is at 97.24. On the downside, 95.27 is the next support line. This is followed by support at 94.59.

• Current range: 95.27 to 96.02

Further levels in both directions:

• Below: 95.27, 94.59, 93.14 and 92.53
• Above: 96.02, 97.24, 98.45, 99.38 and 99.98

OANDA’s Open Position Ratios

USD/JPY has again shifted directions, and currently showing strong movement towards long positions. USD/JPY did move upwards early in the European session, but has now retracted. The ratio continues to be closely split between long and short positions, indicating that trader sentiment is split as to what direction the pair will take. Will USD/JPY break the 96 level, or will the yen flex some muscle against the dollar and make up for some recent losses?

The pair continues to show some movement in both directions, unable to find its footing. We could see some volatility as the US releases its first key releases of the week later today. Meanwhile, we can expect the yen to continue to trade in the high-95 range.

USD/JPY Fundamentals

• 12:30 US Core Retail Sales. Exp. 0.5%
• 12:30 US Retail Sales. Exp. 0.5%
• 12:30 US Import Prices. Exp. 0.5%
• 14:00 US Business Inventories. Exp. 0.5%
• 14:30 US Crude Oil Inventories. Exp. 2.3M
• 17:00 US 10-year Bond Auction
• 18:00 US Federal Budget Balance. Exp. -200.0B

 *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