USD/JPY – Yen Hits 3.5 Year Low Following BOJ Stimulus Package

 USD/JPY continues to trade above the 96 level, as the yen took a tumble on Thursday following the BOJ policy meeting. Under the new leadership of Governor Haruhiko Kuroda, the BOJ rolled up its sleeves and got down to business, announcing bold new monetary easing measures. The markets were caught off guard, as they were not expecting such drastic action at yesterday’s meeting. The BOJ remained in the spotlight on Friday, as it issued its monthly report and Governor Kuroda testified before parliament. In economic news, Japanese Leading Indicators came in at 97.5%, almost matching the estimate of 97.2%. The markets will be paying close attention to today’s highlight, US Non-Farm Employment Change. There are two other major releases out of the US – Unemployment Rate and Trade Balance. 

In Japan, there had been speculation during the week that the Bank of Japan would not take any aggressive action at Thursday’s policy meeting, the first under new BOJ Governor Kuroda. The yen improved as a result, as USD/JPY dipped below the 93 level. However, the tables were turned on Thursday as the BOJ shocked the markets with bold easing measures. The steps include expanding quantitative easing to include riskier assets such as ETFs (exchange traded funds) and real estate investment funds. As well, the BOJ will purchase longer-term government bonds, a move aimed at pushing down longer-term interest rates to coax businesses to borrow (and spend) more. The BOJ stated that it plans to boost the monetary base by JPY60-70 trillion each year, reaching JPY270 trillion by the end of 2014. The aggressive easing moves by the BOJ sent the Japanese currency reeling, with USD/JPY pushing above the 96 level.

With the US continuing to produce weak numbers, there is less talk about the deepening recovery. Last week saw a host of dismal US releases, as manufacturing, housing, consumer confidence and employment figures were all weak. The drought has continued into April, as PMI numbers and the ADP Non-Farm Payrolls fell way below expectations. On Thursday, Unemployment Claims brought no relief. Claims were up sharply to 385 thousand, well above the estimate of 352 thousand. The markets will be crossing fingers on Friday, with the US releasing Non-Farm Employment Change, the Unemployment Rate and Trade Balance. Further poor numbers out of the US, especially in Non-Farm Employment Change, are likely to raise red flags about the health of the US economy, and this could lead to some volatility in the currency markets.

USD/JPY for Friday, April 5, 2013

USD/JPY 96.18 H: 97.19 L: 95.86

The yen has settled down in Friday trading, but continues to look vulnerable. In the Asian session, USD/JPY crossed above the 97 level before retracting. The pair is receiving support at the 96.03. This weak line, which is protecting the 96 level, could be tested if the pair edges lower. The next support level can be found at 95.27. On the upside, the pair faces resistance at 97.24. This line has held solid since August 2009, but was tested earlier today, so it cannot be considered safe. This is followed by resistance at 98.45.

• Current range: 96.03 to 97.24

Further levels in both directions:

• Below: 96.03, 95.27, 94.59, 93.14, 92.53 and 91.48
• Above: 97.24, 98.45, 99.57 and 100.54

OANDA’s Open Position Ratios

USD/JPY is showing little movement in the Friday session. This is reflected in what we are seeing from the pair, which is currently showing little net movement. Traders should keep a close eye on the ratio, as increased activity could be a sign that the pair will follow suit and exhibit more movement.

After a tumultuous session on Thursday, USD/JPY is taking a breather. The yen remains vulnerable, as USD/JPY briefly broke above the 97 line earlier today. We can expect the Japanese currency to remain under pressure, although the direction of the pair could be affected by the readings from today’s key US releases.

USD/JPY Fundamentals

•  1:00 BOJ Governor Haruhiko Kuroda testifies before the Japanese Parliament.
•  5:00 Japanese BOJ Monthly Report.
• 5:00 Japanese Leading Indicators. Estimate 97.2%. Actual 97.5%.
• 12:30 US Non-Farm Employment Change. Estimate 198K.
• 12:30 US Unemployment Rate. Estimate 7.7%.
• 12:30 US Trade Balance. Estimate -44.8B.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 19:00 US Consumer Credit. Estimate 15.5B.

*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.