USD/JPY Fails to Break 100, at least for now


It was a quiet overnight as traders awaited a move in USD/JPY to the 100.00 level that never occurred. Failing to break resistance at 99.80, the USD/JPY traded towards a low of 99.35 before moving towards the middle of that range for most of the Asian and early morning European trading sessions. One of the reasons for the strengthening of the JPY was the release of data that showed

Japanese investors were actually net sellers of foreign bonds. It had been assumed that given the moves earlier this month by the BOJ that Japan’s citizens would be buyers of foreign bonds. In fact the strength of currencies such as the Mexican Peso and the South African Rand were linked to fresh investments by the Japanese. The Canadian dollar’s strengthening yesterday was also credited to the influx of Japanese investment. Inflows from Japan are taking advantage of Canada’s relatively higher interest rates.

According to BOJ Governor Kuroda, the stimulus announced on April 4 is enough to achieve a 2% inflation goal. He stated the central bank had taken all “necessary and possible” measures. He also said he doesn’t expect adjustments to occur each month. He said, “the BOJ will do what’s needed to meet the price target in two years”.

The long awaited FOMC minutes release came 5 hours early yesterday as the FED was forced to release the minutes at 9 AM EST, rather than the normal 2 PM release time when it was found that the information had been leaked to a number of congressional aides the evening before.

The minutes showed that some of the governors thought “labor market conditions had improved as anticipated”, but the main item taken from the minutes was the fact that some governors have begun the discussion about slowing and eventually stopping easing possibly by the end of the year. It should be noted that the economic data that has been released since that meeting on March 19-20 which included ISM and NFP were not good. That seems to be the reason for market reaction to the minutes being rather bland. Weekly jobless claim number is out today and traders will look to see if the trend from last week reverses or continues.

Big news overnight concerned the Aussie Dollar. Data released overnight showed the unemployment rate jumping 0.2% to 5.6% in March and this was the highest level for this number since 2009. The number was expected at 5.4%. This release caused the AUD to fall to support at 1.0500, but the currency has since rebounded and is currently trading at overnight highs just below 1.0580. The resiliency of the AUD shows how the market is still favoring “risk on” currencies and selling USD and JPY.

EUR remained bid during overnight trading, flirting with, but not breaking above 1.3100.

ECB latest monthly report shows the council expects “inflationary pressures to remain contained in the medium term”, noting that economic activity in the Eurozone continues to be weak, but is expected to gradually recover in the second half of 2013. The report reiterated the ECB will help support this recovery by maintaining an accomodative monetary policy for as long as necessary. Technical analysts note that continued failure to break resistance at 1.3120, could see traders reverse once again and sell off the currency.

Further: EURUSD Is Testing 1.3100 Resistance From Where Price Could Retrace To 1.2900/50

The market this morning will be focused on the DOW, which recorded a new high of 14,802.24 overnight. Will today be the day we hit 15,000? Will we get to 100.00 in USD/JPY? Will risk currencies continue to be the apple of trader’s eyes?

We will find the answers to these questions later today.

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Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.

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