USD/JPY – Yen Firm As Markets Eye Yellen Testimony

The Japanese yen has edged higher in Wednesday, as the pair trades in the mid-101 range. On the release front, the Bank of Japan released the minutes from its last monetary policy meeting. In the US, Janet Yellen will testify before Congress on Wednesday and Thursday. The sole Japanese release on Wednesday is the 10-year bond auction.

The Federal Reserve will be at center stage on Wednesday as Janet Yellen testifies before the Joint Economic Committee of Congress. Although recent employment data has been positive, Yellen has sounded cautious about the health of the economy, and if she reiterates these sentiments before Congress, we could see the dollar lose some ground. Meanwhile, the Federal Reserve trimmed its QE program by $10 billion last week. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

There was little to report from the minutes of the Bank of Japan. Bank policymakers expressed concern that the economic recovery is exerting some upward pressure on prices, but the rise might not be enough to hit the BOJ’s inflation target of 2%. The economy seems to have weathered the April sales hike nicely, and Household Spending posted a sharp gain in April, pointing to strong consumer spending.

USD/JPY for Wednesday, May 7, 2014

USD/JPY May 7 at 11:50 GMT

USD/JPY 101.68 H: 101.76 L: 101.43

USD/JPY Technical

• USD/JPY has edged lower in Wednesday trade.
• On the upside, 102.53 is providing strong resistance.
• 101.19 is providing support. There is stronger support at the key level of 100.00.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.97.
• Above: 102.53, 103.07, 104.17, 105.70 and 106.85.

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Wednesday trade, reversing the direction seen a day earlier. This is not consistent with the pair’s movement, as the yen has posted modest gains. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar reversing directions and moving upwards.

The pair has edged lower on Wednesday. USD/JPY is steady in the European session.

USD/JPY Fundamentals

• 12:30 US Preliminary Nonfarm Productivity. Estimate -0.9%.
• 12:30 US Preliminary Unit Labor Costs. Estimate 2.3%.
• 14:00 Federal Reserve Chair Janet Yellen Testifies Before Joint Economic Committee of Congress.
• 14:30 US Crude Oil Inventories. Estimate 0.9M.
• 17:01 US 10-year Bond Auction.
• 19:00 US Consumer Credit. Estimate 15.4B.
• 23:45 Japanese 10-year Bond Auction.

*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.