The USD/JPY has held the spotlight overnight, as the move towards 103.00 was slowed after comments made by Japan’s Economy Minister Akira Amari. He stated concern over the recent depreciation of the Japanese currency.
He stated that the “excessive JPY gains have been corrected a lot”, and he warned that further weakness could have a negative effect. He said that it’s the government’s responsibility to “minimize” that effect.
The USD/JPY had reached the 102.90 resistance level ahead of these comments, but has since moved back toward support at 102.50. A break here at 102.50, could see a move towards 102.30.
While most traders are still expecting the USD/JPY to move to 105.00 by mid-summer, comments like these will certainly make traders think twice about adding to long USD positions and this may make the move harder than originally anticipated.
More: USD/JPY Technical Update: No Pullback So Far – Where Next?
As far as other currencies are concerned, one main focus this week will be speeches coming from FED officials. Comments that the FED may begin to taper their open-ended bond purchases beginning this summer have caught trader’s attention.
There have been rumors that there could be a change the would be announced as early as the June FED meeting. The FED has been purchasing $85 billion in treasuries and mortgage backed securities in an effort to lower borrowing costs to boost recovery. FED Chairman Ben Bernanke testifies this Wednesday on the economy before the Joint Economic Committee of Congress.
The FOMC minutes from the last meeting will also be released that day. Chicago FED President Evans speaks today about the economy and monetary policy. New York FED President Dudley and St. Louis FED President Bullard speaks tomorrow.
It is not expected that Chairman Bernanke will “tip” his hand during his testimony, but the FED Presidents are more likely to say something that will give clues towards the FED’s direction moving forward. The US economy is improving. The question is whether this improvement has been enough to convince FOMC members that its time to begin the “QE pullback”. Any comments of that nature will surely prompt USD purchases.
In other currencies, the EUR has moved off the overnight lows testing resistance at 1.2880 after testing support at 1.2820 overnight. There seems to be no real reason for the move higher except for short covering by traders after failing to break the 1.2820 level. Pressure on the EUR is expected to continue as recession in the Eurozone will keep pressure on the ECB to ease monetary policy further.
Resistance is at 1.2890 and 1.2910, while support is at the aforementioned 1.2820 level, then 1.2790. Germany, France and Switzerland are on holiday today, so there could be less liquidity during the European session.
USD/CAD had a quiet overnight trading range, with a low around 1.0270 and a high at 1.0295. The next real resistance for the USD/CAD shows up at 1.0335. A break there could see a quick move towards 1.0450. This upside momentum will continue, unless the USD/CAD breaks the 1.0175 support area.
Lets see what comments come from the FED Presidents today and tomorrow. The pressure on the EUR should continue, as the USD continues to move higher. Concerns will arise over “overbought” USD positions and profit taking here could see some moves lower. Overall, the markets should remain subdued ahead of Wednesday.
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