A quiet overnight trading session as Tuesday evening turns into Wednesday morning. The JPY is slightly stronger this morning as it looks as if the Terrific Trio of Kuroda, Nakaso and Iwata may end up as the Dynamic Duo of Kuroda and Nakaso.
The selloff of the JPY has temporarily eased up as news came out that the opposition DPJ party will in fact vote down Iwata’s appointment as deputy BOJ governor. Uncertainties over the Iwata vote gave traders time to pause and caused some concern in the markets. The appointment of Kuroda and Nakaso seems all but confirmed and we are certain that Japan will begin to pursue a policy of aggressive easing to attempt to bring the country out of inflation.
USD/JPY tested support at 95.45, before reverting back towards the 96.00 level. Resistance remains at 96.20 and 96.50. Analysts expectation of the eventual test of 100.00 has not changed, but may have been pushed back for the time being.
Other than this news the overnight trading ranges have been uneventful. The EUR has managed to stay above the 1.3000 range, moving to a high of 1.3065 during Asian trading. EMU industrial production is the only real news concerning the EUR this morning, with the consensus for a 0.1% monthly drop for February. Italy and Germany will be issuing bonds today and those results should be available during the North American trading morning.
The overall picture remains for downward pressure on the EUR and the strong support level of 1.2950 is expected to be tested near term. A break there opens the target area to 1.2875. This area is quite significant as it is the 50% retracement level of the overall move from 1.2040 to 1.3710. Strong resistance on the topside is at 1.3160. A break of this level is necessary to eliminate the downward move.
Consider the overnight, somewhat of a “pause that refreshesâ€. Markets need these breathers occaisionally since it can’t go one way forever. The USD is trading stronger in 2013 and one cannot ignore that after years of “disinterestâ€, the moves in the equity market are mirroring the moves in the USD. The DOW remains strong and seems poised to test the 15,000 level eventually. The US economy is slowing gaining traction and this is helping the USD remain bid. Traders will be keenly watching the comments coming from FED Chairman Bernanke after the next FED meeting to see if there are any hints about the easing up, or eventual ending of easing.
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The actions in Japan will take the forefront for the time being, but the EUR problems remain. Italy, Cyprus, Spain and Greece will continue to keep the pressure on the single currency. Traders will also be awaiting the next EU Council meeting that takes place on Thursday and Friday. Will the ministers comment on any of the problems listed above? That will be something to watch.
Look for more continued range trading today. The resistance level on EUR at 1.3070 seems to be holding and sellers emerge at these levels.
