USD/JPY – Dollar Pushes Higher as Market Eyes Bernanke Testimony

USD/JPY has moved higher in Wednesday trading, as the US dollar recovered from losses sustained the previous day. The pair was trading in the mid-99 range in the European session, as the critical 100 line is again within striking distance. In economic news, US inflation numbers were positive on Tuesday, as Core CPI matched the forecast, while CPI came in higher than the forecast. On Wednesday, all eyes will be on Washington, as Federal Reserve head Bernard Bernanke testifies before a congressional committee. As well, the US will release Building Permits, a major event. Over in Japan, the BOJ released the minutes of its most recent policy meeting late Tuesday. The BOJ left its aggressive monetary stance unchanged, and noted that the Japanese economy was recovering.

The Federal Reserve will again be on center stage on Wednesday, as Fed chief Bernard Bernanke testifies before a congressional committee in Washington. Bernanke will present the Fed’s Semiannual Monetary Policy Report, and the markets will be looking closely for any hints about QE tapering. The markets posted huge moves last week, after the release of the Fed’s policy minutes and dovish comments from Bernanke. The minutes pointed to a split amongst Fed policymakers weather to tighten QE sometime in 2013, or wait until the labor market improves. This was followed by speech by Bernanke, in which he said that the Fed would maintain a loose monetary policy for the foreseeable future, due to low levels of inflation and a high US unemployment rate. The dollar took a sharp hit following these developments. The markets will be looking for some guidance from Bernanke’s testimony, and if he hints at a timeline for QE tapering, we could see some volatility in the currency markets.

Over in Japan, the Bank of Japan released the minutes of its last policy meeting. The BOJ did not alter its monetary policy, and policymakers sounded more optimistic about the economy, noting a moderate recovery trend in the economy. The central bank was pleased by the increase in exports due to the weak yen and stronger manufacturing data, although it noted that deflation still remained a problem. The Japanese government has made the elimination of deflation a strong priority, and clearly this battle continues.

USD/JPY for Wednesday, July 17, 2013

USD/JPY 99.77 H: 99.83 L: 99.09

USD/JPY Technical

USD/JPY has improved on Wednesday, climbing close to the 100 line, which is providing weak resistance. Will the pair push above this critical level? There is stronger resistance at 100.85. On the downside, USD/JPY is receiving support at 99.45. This is also a weak line, and could be tested if the yen shows any strength. There is a stronger support level at 98.43.

Current range: 99.45 to 100.00

Further levels in both directions:

• Below: 99.45, 98.43, 97.83, 97.18 and 0.9620
• Above: 100.00, 100.85, 101.66, 102.52 and 103.22

OANDA’s Open Positions Ratio

USD/JPY ratio remains unchanged on Wednesday, continuing the trend we have seen since late last week. This in not reflective of the movement of the pair, as USD/JPY has moved to higher ground. If the pair continues to be busy, we can expect the ratio to follow suit and swing back into action.

The dollar has posted gains on Wednesday, recovering the ground it lost the previous day. We could see some volatility from USD/JPY during the day, as Federal Reserve head Bernanke testifies in Washington. As well, the US will release Building Permits, a key release.

USD/JPY Fundamentals

• 12:30 US Building Permits. Estimate 1.00M.
• 12:30 US Housing Starts. Estimate 0.96M.
• 14:00 US Fed Chairman Bernard Bernanke testifies before the House Financial Services Committee in Washington.
• 14:30 US Crude Oil Inventories. Estimate -1.9M.
• 16:30 US Federal Reserve Governor Sarah Bloom Raskin Speaks.
• 18:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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