USD/JPY: Yellen supported USD/JPY bulls
Macroeconomic overview
Fed Chair Janet Yellen said delaying rate increases could leave the Fed's policymaking committee behind the curve and eventually lead it to hike rates quickly, which she said could cause a recession.
Yellen did not say if Fed policymakers expected the economy would warrant three interest rate increases this year, as they last signaled in December. Nor did she give indications whether the first rate hike of the year might come at its next meeting in March or at the June meeting.
Yellen added that Fed policymakers would be discussing in the coming months how the central bank will eventually reduce the size of its bond portfolio, which ballooned during the financial crisis as the Fed sought to keep rates low. She repeated the Fed's guidance that reducing its holdings would begin when the Fed's current cycle of rate hikes is well under way.
"Changes in fiscal policy or other economic policies could potentially affect the economic outlook," she said. "It is too early to know what policy changes will be put in place or how their economic effects will unfold."
Japanese Prime Minister Shinzo Abe said on Wednesday U.S. President Donald Trump shared his view at last week's summit that Japan's monetary policy was not currency manipulation but was intended to end deflation. Abe's comments about the February 10 summit suggest Trump may be softening his criticism that Japan was manipulating its currency to gain a trade advantage.
Separately, Bank of Japan Governor Haruhiko Kuroda said the central bank stood ready to cut interest rates if the economy took a turn for the worse, suggesting that any threats from Trump would not deter him from taking action necessary to spur growth. He also stressed that the BOJ's ultra-easy policy did not target exchange rates, and was solely aimed at achieving price stability, in line with agreements by members of the G7 and G20 groupings of nations.
Investors' focus is moving to inflation data in the United States for more support for the idea of a rise in Federal Reserve interest rates next month. Consumer inflation is forecast to have risen to 2.4% in January. In our opinion the risks are skewed to a higher print, particularly given the consumer component from yesterday’s strong PPI data.
Technical analysis
The USD/JPY rise was stopped in the area between 114.24 (38.2% fibo of December-February fall) and 114.52 (23.6% fibo of November-December rise). The next resistance is 115.08 (50% fibo of December-February fall). Breaking above that level may open the way towards 117.00.
Trading strategy
Recent rise in the USD/JPY triggered our sell order at 114.20. The stop-loss on this position is above important resistance at 115.08.
GrowthAces.com - Daily Forex Trading Strategies
Macroeconomic overview
Fed Chair Janet Yellen said delaying rate increases could leave the Fed's policymaking committee behind the curve and eventually lead it to hike rates quickly, which she said could cause a recession.
Yellen did not say if Fed policymakers expected the economy would warrant three interest rate increases this year, as they last signaled in December. Nor did she give indications whether the first rate hike of the year might come at its next meeting in March or at the June meeting.
Yellen added that Fed policymakers would be discussing in the coming months how the central bank will eventually reduce the size of its bond portfolio, which ballooned during the financial crisis as the Fed sought to keep rates low. She repeated the Fed's guidance that reducing its holdings would begin when the Fed's current cycle of rate hikes is well under way.
"Changes in fiscal policy or other economic policies could potentially affect the economic outlook," she said. "It is too early to know what policy changes will be put in place or how their economic effects will unfold."
Japanese Prime Minister Shinzo Abe said on Wednesday U.S. President Donald Trump shared his view at last week's summit that Japan's monetary policy was not currency manipulation but was intended to end deflation. Abe's comments about the February 10 summit suggest Trump may be softening his criticism that Japan was manipulating its currency to gain a trade advantage.
Separately, Bank of Japan Governor Haruhiko Kuroda said the central bank stood ready to cut interest rates if the economy took a turn for the worse, suggesting that any threats from Trump would not deter him from taking action necessary to spur growth. He also stressed that the BOJ's ultra-easy policy did not target exchange rates, and was solely aimed at achieving price stability, in line with agreements by members of the G7 and G20 groupings of nations.
Investors' focus is moving to inflation data in the United States for more support for the idea of a rise in Federal Reserve interest rates next month. Consumer inflation is forecast to have risen to 2.4% in January. In our opinion the risks are skewed to a higher print, particularly given the consumer component from yesterday’s strong PPI data.
Technical analysis
The USD/JPY rise was stopped in the area between 114.24 (38.2% fibo of December-February fall) and 114.52 (23.6% fibo of November-December rise). The next resistance is 115.08 (50% fibo of December-February fall). Breaking above that level may open the way towards 117.00.
Trading strategy
Recent rise in the USD/JPY triggered our sell order at 114.20. The stop-loss on this position is above important resistance at 115.08.
GrowthAces.com - Daily Forex Trading Strategies