The main development has been Japanese intervention; the first such operation in six years.  Although there has been speculation of the likelihood of intervention over the past couple of weeks, the market was still caught off guard.  The defeat of Ozawa in his leadership challenge, the immediate threat of intervention appeared to slacken and many market observers had pushed back the “expected” intervention until closer to JPY80 and maybe the start of the new fiscal half year on Oct 1.  In this sense, the intervention caught the market wrong-footed.  Which lead to a large move up today, to 85.

USDJPY is being traded in a tight, sideways trend and it seems that it is
approaching a point where it is ready to break to a side and form a trend. 

The first focus level is at 90.40 and break of this will take USDJPY towards
93.00 level but it seems that it might not be able to do so. And also we
might see some aggressive traders selling for prices above 90.00 level.

On the lower side 89.75 is an important level and USDJPY should break below
this level to continue long term selling trend and once USDJPY breaks below
that level, the next target can be seen around 88.60

USDJPY seems to stay in tight range and being traded in the same manner during this week. USDJPY is getting towards 90.00 level and we might see USDJPY going sown from there towards 89.00 level. Intra-Day traders will more be interesting in buying USDJPY around 89.00 level for short intra-day target. If USDJPY manages to break 88.75 or 90.25 level, we might see the scenario clearing up for long term trades.

Monday, January 18, 2010

The Asian market in its Monday session saw the Dollar surge against the Yen. The trend seemed to carry over from Friday’s session in the North American markets where the Dollar strengthened from 91.02 yen to 90.84 yen. Early Asian trading saw the USD/JPY rising 0.15% so far on Monday from its opening price action at 90.85. The price action seems to discount the prevalent turmoil in Japan over unprecedented political hindrances towards the roll out of the budget and many other bills in consideration. However all eyes are now also on the U.S. banks such as the Citigroup and Goldman Sachs amongst others that are due to declare their financial results later into the week and which could significantly impact the current rally of the US Dollar that already lost ground against several other currencies in early Monday trading. The Euro gained from $1.4381 to $1.4375 late Friday, while the British Pound rose to $1.6321 from $1.6280. Although the market roll may change its course soon according to the developments in the US and China, Japanese exporters will surely take advantage of the weaker Yen. Japan exports more than it imports and this is also at a time when the Japanese biggies such as Toyota and Sony corp. have forecast a second annual loss.

The last three weeks saw Gold rushing forward touching the high of $1,140, due to economic uncertainty and demand for a hedging instrument. Today, the yellow metal has retreated slightly to below $1,130. Another factor contributing to the decline of the precious metal has been the charging US dollar, which today saw a further strengthening on expectations of economic recovery in the US.

In the Asian and early European sessions, the Dollar moved upward against all major currencies, particularly against the Yen, which has seen a slight weakening in recent times. It is currently said to be testing a major resistance at the 93 level, having moved beyond 91.25 and 92.75.

Analysts are now suggesting that the USD/JPY pair is likely to see a strong 2010, with the possibility of 100.00 not too far away, 3rd quarter likely as suggested. It is further suggested that 97 could be the level to watch out for for Q2 2010.

The US Dollar floated today near its 16-week highs due to a generally weak Yen. Due to the holiday, low volume of trading in the forex markets along with general weakness in the Yen, contributed to keeping the Dollar up near its highs and the Yen languishing.
The Yen has been weighed down lately on account of weak inflows of remittances due to a rather expensive Yen that reduced the value of goods exported abroad. In addition, lack of optimism about the Japanese economy, along with low interest rates and concerns over fiscal health are not helping the Japanese currency. S&P has also hinted at dangers to the stability of the economy in Japan.
Traders were found to be mostly squaring off and closing positions due to year ending and focusing on positive signs from the US economy. There isn’t much news at the time of writing this report, which follows in line with low trading volume due to the year-end.

In the absence of major news, traders continue to square their books at year-end and react positively to dollar-supportive U.S. economic data. Ongoing doubts concerning Japan Airlines and the company’s possible bankruptcy are having a negative impact on the yen. Standard & Poors warned Japan’s “AA” credit rating could be lowered if Japan fails to stabilize its debt levels.

The Japanese Yen took a massive hit as the Bank of Japan threatened intervention in the currency market. The USD/Yen pair rose to a high of 91.79 on account of heavy demand for the US dollar from the Japanese export market.

Taking a cue from the sentiment for the coming year, traders have been building positions in major currencies ahead of the holidays in Japan, with the US dollar not too far from the high set about 2 weeks ago, and the Euro also up by about .2%. Equity and commodity markets also saw an upturn, particularly in Crude which traded above $78.

Fundamentally, the Yen has lost out primarily on account of poor economic forecasts which suggest Japan is still not out of the red yet. The outlook is not being helped by Japanese export repatriations, which have lost out due to a stronger Yen, thereby curbing the value of Japanese exports.

Since earlier this month, the Dollar has been on an upward movement, touching a high last week on the 14th when it hit 98.97. it has fallen only once since and today it continues to move upward making a new 2 month high at 91.85 (yesterday), trading range-bound today around 91.55 to 91.80. the 91.85 level is a key resistance level, which if tested, could lead to yet another high for the USD-JPY pair.

The dollar has been cashing in on investor sentiment based on economic recovery in the US, which has been ‘hurting’ the dollar’s attractiveness in carry trades. The US Dollar earlier had touched 91.87, the highest level seen in the USD-JPY pair since mid to late October.

Traders are now anticipating, given the market conditions and dollar performance, that the Fed could raise interest rates in the Fed meeting around June. The overall sentiment has been positive in the US on account of encouraging economic data.