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After flirting with the psychological 100 level during the Asian session, the USD/JPY has backed off once again to trade in the mid 99.60-90 range for most of the overnight trading session.

A move above 100.00 for the Japanese currency is still expected, which would be the first time the currency achieves this level since April 2009. Bank of Japan Governor Haruhiko Kuroda said he was “emboldened to press ahead with his campaign to defeat inflation”, following the G20 meeting where Japan avoided criticism for their policies that have drastically weakened the JPY.

Kuroda also said that “winning international understanding gives me more confidence to conduct monetary policy appropriately”. He pledged to continue qualitative and quantitative easing for the next two years”. There really is no reason to keep the

USD/JPY from breaking the 100.00 level so it is expected to happen eventually.

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According to the CFTC, futures traders have increased their short JPY positions over the last week. The total of net shorts increased to 93,411 for the week of April 16 compared to 77,697 for the week earlier.

The EUR had a quiet overnight trading range trading to a low of 1.0335 while reaching a high during the Asian trading session of 1.3083. Italian elections saw Italian President Napolitano re-elected. After the election result, Democratic Party leader Pier Luigi Bersani resigned which has increased optimism Napolitano will be able to form a new government. While most analysts believe this election results are “Euro-positive”, the single currency has yet to react to this result.

As the G20 meeting ended the communique stated that global recovery “remains uneven, progressing at different speeds”. As far as currency markets are concerned, the G20 reiterated their pledge to “refrain from competitive devaluation”.

In other currencies, the GBP has moved lower against both the USD and EUR after the Fitch rating agency downgraded the United Kingdom’s credit rating to AA+ from AAA with a stable outlook. The downgrade statement stated that the UK still had an “extremely strong credit profile”, although “adverse economic and financial shocks” are no longer consistent with an AAA rating. GBP/USD has seen a low near 1.5200 overnight and is currently trading in the middle of its overnight range. Support for the GBP remains at 1.5200, followed by 1.5180. Resistance is at 1.5250 and 1.5280.

As we head into the North American trading session, traders are reporting that there are stop loss orders in USD/JPY just above the 100.00 level, so a break there later today, could see a quicker move towards 100.50, before sellers emerge. Traders seem to feel that if there is a major currency move today it will be in the USD/JPY and that will effect the other currencies. EUR should react positively if the USD/JPY move occurs as EUR/JPY cross buying will benefit the single currency.

There has been a comment from ECB member Constancio that an ECB rate cut is “always a possibility”, but that statement seems to have gone unnoticed by traders for the most part.

Gold is higher this morning, while silver remains somewhat pressured, and crude oil remains below $90.00 per barrel. The AUD/USD and the USD/CAD have reacted as expected with AUD testing support at 1.0250 and USD/CAD testing resistance at 1.0280.

It seems that every morning traders push the EUR higher in early North American session trading. If the USD/JPY moves towards the 100.00 level, cross currency EUR buying should see that happen again. With pressure not only on the JPY, but on GBP as well, EUR could remain bid.

Further reading:  Shakeup in Italian Politics – Two Options for Italy and the Euro