USDJPY Recovers as Equities Rises, Risk Appetite Gets Better - 14.6.2013

Traders’ main focus has been on BOJ minutes of the May 21-22 meeting with members stating their commitment to quantitative and qualitative easing measures, however they expressed some concerns that bond market volatility may continue increasing interest rate risk for banks. In addition, one member said that financial imbalances may be created because market participants could be expecting extreme additional measures by BOJ if CPI target eventually prove to be difficult and suggested that quantitative and qualitative easing should be restricted to 2 years, but was rejected by other members. The USDJPY recovered from yesterday lows at 93.81 towards resistance at 95.80, mainly was following NIKKEI’s advancement as positive correlation continues. During the release of meeting minutes the pair dropped suddenly as traders were expecting BOJ to be more willing to take further easing measures. Technically the USDJPY is considered oversold in the daily and almost oversold in the weekly timeframe, thus correction is suggested, but volatility is high with the Yen strengthening on risk aversion situations, therefore predictions are hard to make.

NIKKEI 225 futures recovered today, underpinned by US equities bounce up. S&P 500 futures rose by 1.48% to 1,636.36, Dow Jones Industrial advanced by 180.85 points to end at 15,176 and NASDAQ gained by 1.32%. US Stocks were seen as oversold and together with positive data on Jobless Claims and Retail Sales, were lifted, improving risk appetite ahead of FED’s monetary decision next week. US dollar index managed to hold its ground above 80.50 bouncing as high as 80.96 and then extending its consolidation between that range. Due to highly expected FOMC statement next week we consider sideways for the US dollar a likely scenario.

Looking ahead for today, Eurozone CPI is eyed, falling lower than expected would increase chances for ECB rate cut and that could in turn weigh on EURUSD, currently is trading at 1.3339. Next for US PPI, Current Account and Industrial Production follows to end with Uni. of Michigan Consumer Sentiment.