USD/JPY – Yen Slides as BOJ Head Steps Down Early

The yen continues to hit multi-year lows against the US dollar. In early Wednesday trading, USD/JPY briefly pushed across the 94 line before retreating slightly. The yen lost more ground with the surprise announcement that BOJ Governor Masaaki Shirakawa would be stepping down earlier than expected from his position. In the US, Tuesday’s key release was a non-event, as ISM Non-Manufacturing PMI matched the market estimate. There are only two economic releases scheduled for Wednesday.

The Japanese yen’s woes continue, with no relief in sight for the beleaguered currency. USD/JPY pushed across the 94 line in early Wednesday trading, before retracting. The markets were caught off guard as BOJ Governor Masaaki Shirakawa announced on Tuesday that he would be stepping down on March 19, three weeks earlier than expected. Two deputy governors will also retire on the same day, and these key positions will likely be filled with officials who can be counted on to tow the line and follow the Japanese government’s aggressive easing policy. Japanese officials have consistently denied manipulating the value of the yen, which as plunged 12% in the past few months. However, Japan’s trading partners remain unconvinced, as they have watched Japan implement easing steps which have sent the yen tumbling.  The weakening yen has made their own exports less competitive in international markets, hurting their economies. The value of the yen is likely to be a hot topic at the upcoming G2o meeting in Moscow. Meanwhile, the markets are bracing for more agressive easing, underscored by comments from BOJ board member Takehiro Sato, who stated that reaching the government’s target of two percent will be difficult without further action.

Back in the US, recent economic indicators continue to keep the markets guessing about the extent of the US recovery. Recent key releases continue to paint a mixed picture. US GDP was a major disappointment, as the economy contracted for the first time since 2009. Employment numbers lost their recent shine, as NFP and Unemployment Claims failed to meet expectations, and the unemployment rate inched up to 7.9%. On the bright side, last week’s consumer sentiment and manufacturing PMI data was very strong. In Wednesday’s releases, ISM Non-Manufacturing PMI, a key indicator, declined slightly, but still matched the estimate. With only a handful of key US releases this week, each one will find itself under the market microscope as the markets try to get a handle on where the US economy is headed.

USD/JPY for Wednesday, February 6, 2013

USD/JPY February 6 at 11:45 GMT

USD/JPY 93.67 H: 94.05 L: 93.46

USD/JPY continues to push to higher levels, and tested the 94 line earlier. The pair is facing weak resistance at 93.73, and this line could be breached at any time. This is followed by stronger resistance at 94.59. On the downside, there is support at 93.14. This line has strengthened as the pair trades close to the 94 line.

• Current range: 93.14 to 93.73.

Further levels in both directions:

• Below: 93.14, 92.53, 91.94, 91.30, 91.94, 90.91, 90.23, 89.85 and 89.31.
• Above: 93.73, 94.59, 95.27, 96.06.

OANDA’s Open Position Ratios

The USD/JPY ratio is displaying with more of the same, showing little activity. This is in line with the current activity of the pair, which has leveled off after failing to sustain a break above the 94 line. The ratio continues to almost evenly split between the long and short components, as trader sentiment remains evenly divided as to whether the yen will continue to slide, or will we see a correction and improvement by the Japanese currency against the US dollar. With the pair showing a lot of volatility recently, the lack of movement in the ratio is unlikely to continue much longer.

USD/JPY continues its upward trend, with the pair close to its highest levels in almost three years. Will the pair move into 94 territory? With the markets expecting further easing steps in Japan, and the Japanese economy continuing to stumble, the hapless yen could continue its tumble. 

USD/JPY Fundamentals

• 15:30 US Crude Oil Inventories. Estimate 2.7M.
• 23:50 Japanese Core Machinery Orders. Estimate -0.7%.  

*Key releases are highlighted in bold

*All release times are GMT

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