USD/JPY - Yen Flat As BOJ Gives Economy Thumbs-Up

 |  Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The Japanese yen is showing little movement on Wednesday, as USD/JPY trades in the mid-101 range late in the European session. In Japan, the BOJ issued a relatively upbeat policy statement and said it would maintain current monetary policy. The Japanese current account deficit improved, but still fell short of the estimate. In the US, the Federal Reserve will release the minutes of its recent policy meeting.

There were no surprises from the Bank of Japan policy statement on Wednesday. The Bank noted that the economy continues to recover at a moderate pace, and said that monetary policy would not change. The BOJ has been purchasing 60-70 trillion yen/year in asset purchases, and this aggressive monetary stance has raised inflation and growth levels, but has severely hurt the yen, which continues to trade above the 100 level.

Japanese releases continue to point upwards, as manufacturing releases have been strong. Last week, Revised Industrial Production bounced back after a sharp decline, posting a gain of 0.7%. This beat the estimate of 0.4%. The good news continued on Monday as Core Machinery Orders soared 19.1%, crushing the estimate of 6.1%. This marked the sharpest gain we've seen since January 2010. If Japanese data continues to point upwards, the yen could post further gains against the US dollar.

All eyes will be on the Federal Reserve on Wednesday, with the release of the minutes of the most recent policy meeting. The Fed has been steadily trimming its asset purchase program since December, and is expected to wind up the program before the end of 2o14, provided that the economy does not take a downward spin. Since 2008, the benchmark interest rate has been close to zero, and no increases are expected before mid-2015. The pace of future increases will likely be slow to allow for a smooth adjustment from the economy and the financial markets.

In the US, key indicators have been generally strong, and last week ended with encouraging housing numbers. Building Permits jumped to 1.08 million, well above the estimate of 1.01 million. This was the highest level we've seen since December 2006. Housing Starts continues to move higher and climbed to 1.07M, compared to the estimate of 0.98M. This marked a five-month high. Meanwhile, UoM Consumer Sentiment dipped to 81.8 points, short of the estimate of 84.7 points.

USD/JPY for Wednesday, May 21, 2014

Forex Rate Graph 21/1/13

USD/JPY May 21 at 13:15 GMT

USD/JPY 101.30 H: 101.39 L: 100.83

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 101.19 102.53 103.07 104.17
Click to enlarge
  • USD/JPY is showing little activity in Wednesday trade.
  • On the upside, 102.53 is providing strong resistance.
  • 101.19 remains under strong pressure and saw action earlier in the day. The key level of 100.00 follows.
  • Current range: 101.19 to 102.53

Further levels in both directions:

  • Below: 101.19, 100.00, 99.57 and 98.97.
  • Above: 102.53, 103.07, 104.17 and 105.70.

OANDA's Open Positions Ratio

USD/JPY ratio is almost unchanged in Wednesday trading, continuing the trend we have seen since the start of the week. This is consistent with what we are seeing from the pair, which is showing little movement. The ratio is made up of a majority of long positions, indicating trader bias towards the dollar breaking out of range and moving upwards.

USD/JPY is listless on Wednesday. In the European session, the pair has edged higher.

USD/JPY Fundamentals

  • 2:42 BOJ Monetary Policy Statement.
  • 6:32 BOJ Press Conference.
  • 14:00 US FOMC Member William Dudley Speaks.
  • 14:30 US Crude Oil Inventories. Estimate -0.1M.
  • 15:30 US Federal Reserve Chair Janet Yellen Speaks.
  • 17:30 US FOMC Member Narayana Kocherlakota Speaks.
  • 18:00 US FOMC Meeting Minutes.

*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.