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Yen Gains Traction After Central Bank Meetings

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Yen Gains Traction After Central Bank Meetings

The Federal Reserve and the Bank of Japan met yesterday and produced similar results which reflected economies that continue to struggle without stimulus. Both central banks reported that they would continue their bond purchase programs in an effort to simulate growth and induce inflation.

The BOJ meeting followed the FOMC meeting and failed to produce any substantial changes. The central bank unanimously kept its monetary policy unchanged, as expected. Weekly MOF data show that Japan investors were net buyers of foreign bonds for the third straight week and net sellers of foreign stocks for the second straight week.

The Fed meeting produced a result that was status quo, but they FOMC did remove a statement that reflected the political brinkmanship that was occurring during the period prior to the last FOMC meeting. The Fed plans on keeping the bond purchase program intact and will revisit the issue during its December meeting. Interest rate expectations reflected by the futures market shows that rates will remain at current levels until the second half of 2014.

The USDJPY is trading in a tight range capped by a downward sloping trend line near 98.50, and floored by and upward sloping trend line near 97.30. Longer term resistance is seen near 100 while strong support on the currency pair is seen near 96.50.

Momentum on the currency pair is flat with the MACD (moving average convergence divergence) index printing near zero. The spread and the 9-day moving average of the spread are nearly the same. The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels is printing near the 52 level which reflects consolidation.

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