USDJPY Steps Above 94 on the US Support

Market Brief

The Asian session remained calm, as the majority of the equity markets were closed for the Lunar New Year for the second day, except Japan, Korea and Australia. The currency markets were dominated by weaker Yen, amid US Treasury Brainard said that US supports Japan in its efforts to fight the deflation and promote growth. While the IIF (Institute of International Finance) called on the G20 “to strengthen the global regulatory framework” and “take decisive action to raise global growth, reduce unemployment, and bolster financial stability”, the head of IIF, Mr. Adams, signaled no currency war in discussions for the upcoming meeting.

On the back of Brainard’s comments, Yen weakness broadened, while EUR made a short attempt to the upside. USDJPY rallied to 94.32 (its highest since April 2010), EURJPY hit 126.64, while GBPJPY tested 148.00 level, before some consolidation early in today’s session. The offers in USDJPY are expected at 94.50, and massive at 95.00. EURUSD rallied to 1.3428, yet failed to survive above 1.34 as the concerns over the strong Euro and the negative impacts on EZ economy limited gains.

In stock markets, the Nikkei 225 advanced by 1.94%, while the Korean’s Kospi index wrote off 0.26% due to growing fears on the Yen weakening. In Australia, the business conditions remained negative in January, according to NAB, but the business confidence did not deteriorated. In New Zealand, the electronic card sales increased by 0.3% as expected, the residential house price index decreased by 1%, while the house sales surged by 21.1% in January. The S&P /ASX 200 and NZX index were little changed during the session. AUD extended its weakness. AUDUSD hit 8-month low. AUDJPY was supportive, but not enough against the downside pressure from USD, EUR and NZD.

Today, the economic calendar focuses mostly on UK. Also, SNB Governor Jordan will speak at 10:00 GMT, BoC exiting Governor (BoE new Governor from July 2013) Carney at 13:45 GMT, and ECB President Draghi at 15:30 GMT. We expect some volatility during speeches, as the markets should try to capture the smallest hint ahead of the G20 meeting, scheduled for the end of the week. On the economic agenda, watch also the French December Current Account, Swiss and UK January CPIs, UK January PPIs m/m and y/y, UK January Core CPI, UK January RPI m/m and y/y and finally the US Monthly Budget Statement deficit expected to have narrowed to USD-2.00B from previous month’s USD27.41B deficit.

Currency Tech

EURUSD
R 2: 1.3491
R 1: 1.3410
CURRENT: 1.3375
S 1: 1.3367
S 2: 1.3300

GBPUSD
R 2: 1.5891
R 1: 1.5710
CURRENT: 1.5651
S 1: 1.5620
S 2: 1.5574

USDJPY
R 2: 95.00
R 1: 94.57
CURRENT: 94.12
S 1: 93.88
S 2: 93.47

USDCHF
R 2: 0.9385
R 1: 0.9267
CURRENT: 0.9209
S 1: 0.9155
S 2: 0.9100

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot