USD/JPY and FOMC meetings dominate the markets as USD/JPY continues it slow march to the 100.00 level and the latest meeting minutes from the FED are released today at 2:00 pm.
After briefly trading below the 99.00 to 98.91 during the Asian trading session, the USD/JPY has traded back through 99.00 and has touched the 99.50 level today. Resistance levels are noted at 99.60 and 99.80, ahead of the psychological level of 100.00. Support levels are at 98.60 and 98.30. A close below the 98.30 level would signal a reversal, but very few traders are expecting that to happen.
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At present, the RSI on the USD/JPY is showing strong overbought signals, so there is always a concern about a “bearish reboundâ€, especially if we gain momentum on a sell off through 98.80. As expected, analysts are now raising their forecasts on the USD/JPY. Those who had the currency pair reaching 100.00 by the end of this year, have adjusted that prediction to 110.00, and some have even raised their 2014 predictions to 120.00.
Japanese Prime Minister Shinzo Abe commented today regarding the currency. He stated, “Bold monetary easing will cause a change from deflation to inflation. As a result, the yen weakens, or rather, the excessively strong yen is correctedâ€. He also said the government is not intentionally trying to weaken the currency.
In other currencies, the Australian Dollar (AUD) has strengthened after China reported an increase in imports. China is Australia’s leading trading partner. Australian Treasurer commented today that the AUD is “defying gravityâ€, since commodity prices are falling yet the AUD is strengthening. The AUD/USD broke through the 1.0500 level and tested resistance at 1.0525.
The EUR continues to strengthen as the single currency has tested resistance at 1.3120. The move higher that begin last Thursday after the ECB meeting has continued despite less than positive economic news releases. Ignoring these economic releases, traders are focusing on better bond market yields that have occurred since the BOJ announcement last week. While fundamentals in the Euro-zone remain poor with either fiscal or political problems in Portugal, France and Italy, the currency continues to motor higher. Most analysts still expect a rate cut from the ECB sooner rather than later, and some experts see the EUR retracing back to the 1.3000 level. But that hasn’t occurred yet.
The FOMC releases their latest meeting meetings this afternoon and this will be the main focus for traders today. The minutes are expected to show that FED governors are upbeat on the economy. The minutes are also sure to show discussions about slowing the monthly asset purchases. The disappointing economic data in March, since the FED meeting has tempered traders feelings towards the USD, so it will be interesting to see the trader reaction to this release.
I would expect a quiet market until the 2:00 pm release.
