USD/JPY – Dollar Spanks Yen After Yellen Rate Comments

The US dollar posted strong gains on Wednesday, jumping almost 100 points against the yen. USD/JPY has settled down in Thursday trading, as the pair trades in the mid-102 range. At its policy meeting, the Federal Reserve announced a third $10 billion taper and said that interest rates could rise in early 2015. It’s a busy day in the US, with three key events on the schedule – Unemployment Claims, Existing Home Sales and the Philly Fed Manufacturing Index. In Japan, BOJ Governor Haruhiko Kuroda spoke at the Japan Chamber of Commerce in Tokyo.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting headed by Janet Yellen. The decision to trim QE by another $10 billion was widely expected, but her comments at the follow-up press conference gave the dollar a big boost against its major rivals. Yellen said that the Fed was on track to wind up QE in the fall, and could start to raise interest rates six months later. This is a more aggressive approach towards higher rates than the markets had expected, and the dollar responded with sharp gains against the yen.

Western countries are scrambling to respond to Russia’s lightning takeover of the Ukrainian region of Crimea. The EU meets later on Thursday and may announce trade sanctions to punish Russia. Meanwhile, Ukraine says it will order its troops in Crimea to withdraw to the mainland, in order to de-escalate the extremely tense situation. The crisis has set off the worst confrontation between Russia and the West in over twenty years.

USD/JPY for Thursday, March 20, 2014

USD/JPY March 20 at 12:15 GMT

USD/JPY 102.43 H: 102.55 L: 102.21

USD/JPY Technical

• The yen has steadied after sharp losses on Wednesday.
• 102.53 has weakened as the dollar has shot higher and could be tested during the day. This is followed by strong resistance at 103.30.
• 101.19 is providing support. The next support line is the key level of 100.00, which has held firm since last November.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.65
• Above: 102.53, 103.30, 104.17, 105.70, 106.85

OANDA’s Open Positions Ratio

USD/JPY ratio has reversed directions on Thursday, pointing to gains in short positions. This is consistent with the yen’s strong losses, which have led to the covering of long positions, resulting in an increase in open short positions. Long positions make up a majority of the open positions in the ratio, indicating trader bias towards the dollar rally continuing.

The yen is trading quietly in the European session, as USD/JPY takes a breather after sharp gains by the dollar on Wednesday.

USD/JPY Fundamentals

• 7:15 BOJ Governor Haruhiko Kuroda Speaks.
• 12:30 US Unemployment Claims. Estimate 327K. 
• 14:00 US Existing Home Sales. Estimate 4.65M.
• 14:00 US Philly Fed Manufacturing Index. Estimate 4.2 points.
• 14:00 US CB Leading Index. Estimate 0.3%.
• 14:30 US Natural Gas Storage. Estimate -58B.
• 20:00 US Bank Stress Test Results.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.