The USD/JPY was the main currency mover overnight as it became clear that Japan’s policies went unopposed as members of the G20 nations met in Washington. The G-20 meeting will not stand in the way of a lower JPY.
There had been expectations that there would be more international opposition to the policies of Premier Shinzo Abe, but this did not occur.
USD/JPY broke the 99.00 level, rising to 99.33, just below technical resistance at 99.40. The G20 meeting concludes today and the draft of the statement to be released at the end of the meeting will avoid direct criticism of Japan’s stimulus plan, while affirming a commitment for countries to avoid weakening their currencies to gain a trade advantage.
The next meeting of the Bank of Japan is scheduled for April 26 and it is expected that they will implement additional easing at this meeting. Technically speaking, it looks as if the USD/JPY is once again ready for a test of the 100.00 level. The move higher overnight has seen USD/JPY move into an overbought situation, so further upward moves could be limited today. A number of moving average resistance areas were taken out. The 99.45-50 level has fairly strong resistance. A break here however, could see a quick move to 100.00.
EUR and AUD have benefitted by from the weaker JPY overnight. AUD once again moved above the 1.0300 level and is presently trading a little below its overnight highs. The EUR has not had as dramatic a move, but the cross buying has given the EUR a bid tone as we enter into the European trading session. EUR/JPY has moved from a low of just above 128.00 to a high of 129.90. Adding to the EUR move was the release of EMU current account data that was surprising positive. Seasonally adjusted current account was at a surplus of EUR 16.3 billion in February from EUR 13.8 billion in January. The expectation was for an increase of EUR 15 billion.
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In other news overnight, a widening of China’s Yuan trading band could occur shortly based on comments coming from the Bank of China. A announcement is expected to come sometime during the G20 meeting in Washington. A widening of the band should not be confused with a move to strengthen the Yuan. At the present time, the Chinese Yuan is allowed to rise or fall 1% from a level fixed against the dollar on a daily basis. The USD/CNY currently trading around 6.1805, and had been as low as 6.17, the strongest level since China created a domestic currency market in 1994.
Friday’s economic calendar is rather quiet, and the major focus during North American trading will be the release of Canadian inflation data.
Traders will look for news from the G20 meeting today to give direction to the currency markets. Expect a bit of move lower in USD/JPY initially as traders take some profits from the overnight move. EUR, AUD and GBP should continue to benefit from cross buying against the JPY.
