BOJ testing illiquid conditions?

USD modestly firmer across the board on light volumes as desks in NZ and UK are off on holiday. Aussie leading the G10 pack lower as data released earlier suggesting room for more RBA rate cuts – TD Securities Inflation was flat in May versus a +0.3% rise in April and while AZN May Job Advertisements declined twice in as many months. Comments by Australia’s Hockey stating government surplus may give RBA more room to move alongside a large domestic AU bank’s statement that AUDUSD may decline to test the 2011 lows around 0.9388 didn’t help much. Initial support comes in around 0.9625.

USDJPY gapped higher before suspiciously spiking about +35 pips higher around 2000ET. Rumors of BOJ involvement quickly made the rounds although Azumi declined to comment. Japanese government officials’ and BOJ lip flapping dominated Asia session news-flow:

BOJ Governor Shirakawa says need to monitor impact of strong yen
Shirakawa: BOJ to evaluate effect of pledged easing
Shirakawa: BOJ to conduct appropriate policy
Shirakawa: BOJ is conducting powerful monetary easing
Shirakawa: BOJ is buying considerable amount of JGBS
Shirakawa: BOJ bond buys not intended to finance government debt
Shirakawa: Various uncertainties for Japan outlook - Europe debt crisis being the biggest uncertainty
Noda says yen movement doesn't reflect japan economic situation
Yunekura says government and BOJ should consider unilateral intervention

USDJPY has been trading in a tight 10 pip range since the above-mentioned spike in the NY pm.

EURUSD dipped its toes below the 1.2400 figure but is managing to hold above…for now. Spain’s unemployment rate will be released at 0300ET, expectations are for a ridiculous -31% print for May. With chatter of BOJ testing the illiquid FX waters today after the small spike seen in USDJPY earlier today, it wouldn’t be surprising to see similar EURCHF spikes and rumors of SNB involvement materialize during the London Session, without London that is. That said, price action in currency markets may whip around and should be taken with a grain of salt as it likely wouldn’t be representative of the entire market.

Source: Forex.com

04.06.2012