The US dollar was broadly stronger on Thursday, as US Federal Reserve chair Bernard Bernanke testified in Washington. USD/JPY posted modest gains, and crossed above the 100 level. Bernanke left the door open for scaling down QE, but said the Fed would not take action until the economy showed further improvement. In economic news, the US will release two key events later on Thursday – Unemployment Claims and the Philly Fed Manufacturing Index. There are no Japanese releases on Thursday.
There was plenty of anticipation ahead of US Federal Reserve chair Bernard Bernanke’s testimony in Washington on Wednesday, but there was no drama or fireworks. In his testimony, Bernanke basically served the same menu we’ve seen before with regard to QE. The Fed chief sounded extremely vague when he stated that the Fed bond-buying was “not on a preset course”, leaving the Fed plenty of room to scale down QE should it choose to do so. Bernanke reiterated that any decision to scale down QE would depend on improving economic conditions. He noted that present unemployment levels (7.6%) were “well above” normal levels, and was careful not to be pinned down by any deadlines for scaling down QE. So, the message from the Fed to the markets seems to be that QE tapering is not on the table before the economy improves and unemployment falls. Bernanke will continue his testimony before a Senate committee on Thursday, and it’s unlikely we’ll hear anything unexpected. The markets reacted cautiously to Bernanke’s testimony, and USD/JPY posted modest gains, as the pair pushed above the important 100 line.
Earlier in the week, 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 cornerstone of its economic agenda, and clearly this battle will continue.
USD/JPY for Thursday, July 18, 2013
USD/JPY 100.14 H: 100.34 L: 99.46
USD/JPY continues to improve, and crossed above the 100 line late in the Asian session. This key level has been busy all week, and is back again in a support role. It is a weak line, and could fall if the yen shows any signs of recovery. The next support level is at 99.45. On the upside, the pair faces resistance at 100.85. This is followed by strong resistance at 101.66.
- Current range: 100.00 to 100.85
Further levels in both directions:
- Below: 100.00, 99.45, 98.43, 97.83, 97.18 and 0.9620
- Above: 100.85, 101.66, 102.52 and 103.22
OANDA’s Open Positions Ratio
USD/JPY ratio is back in action on Thursday after displaying very little activity this week. The ratio is pointing to movement towards short positions. This in not reflected in the current movement of the pair, as the dollar continues to post gains against the yen. Long positions continue to enjoy a sizeable majority of open positions, indicating that trader sentiment is biased towards the yen reversing direction and moving higher.
The dollar continues to move higher, and has again reconquered the 100 level. Will the dollar succeed in consolidating these gains? We could see some volatility from USD/JPY later in the day, as the US releases key employment and manufacturing numbers. As well, the markets will be keeping a close eye as Bernard Bernanke continues to testify in Washington. Any unexpected comments from the Fed chair could quickly move the markets.
- 12:30 US Unemployment Claims. Estimate 344K.
- 14:00 US Philly Fed Manufacturing Index. Estimate 8.5 points. Actual 19.8 points.
- 14:00 US CB Leading Index. Estimate 0.3%. Actual 0.0%
- 14:30 US Fed Chairman Bernard Bernanke Speaks. Bernanke will testify before the Senate Banking Committee in Washington.
- 14:30 US Natural Gas Storage. Estimate 63B.
*Key releases are highlighted in bold
*All release times are GMT
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