• JPY Finds New Strength Against USD
• Exporters In Pain
• All Eyes On Fed Friday

The Japanese yen has made moves higher against a number of its major peers, including both the USD and the EUR. Its ascent up live forex charts has been attributed, at least in part, on suspicions that the Bank of Japan (BoJ) will refrain from adding stimulus to the economy.

Ahead of important FOMC minutes, which have the potential to change dynamics, the USD/JPY tested new month lows as the drift down from a peak five days ago continued. Currently trading at 97.13 against the EUR, industry analysts foresee problems for already beleaguered Japanese exporters. This “is clearly not good news for Japanese exporters labouring with 105ish budget rates” he commented. “The move lower in spot only adds to their agony, an agony that is not really relieved by the lessening of the discount on forward points in, for example, the three months.

“A World Of Pain” For Japanese Exporters

“I think that Japanese exporters will remain in a world of pain and that they will be forced, yet again, to rely on end of month Tokyo fixings to execute minimum operational requirements.  And in the meantime, I suspect this also means that rallies in this cross will remain painfully limited.  I now hear a lot of leveraged interest to sell bounces.  Even 98.00 looks a high hurdle to scale”, he added.

The USD/JPY reached a month high at five days ago when it peaked at 80.09, but has since been dragged down by a lack of faith in the U.S. recovery and Japanese ambivalence towards further easing.

The outlook for the USD/JPY currently looks to be strongly bearish as we move into the latter part of Wednesday’s session, with FOMC minutes looming. Forex traders will be on the lookout for any sign that the Fed will engage in a further round of easing from June’s Open Market Committee Minutes, a move which is likely to re-stimulate the flagging USD.

BoJ Remains Reticent

Meanwhile, however, the BoJ remains reticent about the prospect of further easing in the immediate future, providing further fuel for the strengthening Japanese currency. A survey of 17 top industry analysts by Bloomberg has already revealed that they expect no change in terms of easing when the two-day meeting draws to close. “We do think the BOJ will ease further, but not at this week’s policy meeting,” said Callum Henderson (pictured), global head of currency research at Standard Chartered Plc in Singapore.

“That’s going to be a further source of disappointment if indeed that plays out. The yen should strengthen.”

In terms of its performance on live forex charts, expectation is for short-term supports for the USD/JPY to rest at 79.15, 79.01 and 78.81. On the upside, any break above 79.49 should expose 79.69 and 79.84 to further testing.

Do The Twist

Once the outcome of the BoJ’s two-day meeting has been announced and the forex markets have made their moves, investor eyes will no doubt be turning back to the U.S. for Friday and the next twist in this tale.

The general consensus on the American recovery from many analysts is decidedly pessimistic and hopes for further Fed intervention are riding fairly high. Corporate earnings have begun to emerge with a decidedly downbeat tone, and confidence in the strength of the U.S. recovery is constantly being undermined by the ongoing euro zone crisis. But what accommodative measures Bernanke and the rest of the Fed will implement after Operation Twist is complete, the sign that further easing is on the way at all, will dictate the strength of any market moves.

Sarah Cox, Markets Writer. ForexSpace.com.