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Fed meeting drives USD/JPY higher

Janet Yellen’s first press conference has sent equity markets reeling but gave a powerful boost to the dollar, causing USD/JPY to break the ¥102 level.

Now that we’re expecting an earlier rise to interest rates in the US – thanks to Janet Yellen – it seems USD/JPY is minded to hit ¥103 again.

Ms Yellen suggested in her press conference that the timing between the end of quantitative easing (QE) and the first rate-hike would be around six months. Apparently, that’s her definition of a ‘considerable time’; most traders appear to differ on that point. However, if QE3 comes to an end in October 2014, then we’re looking at a rate hike in the second-quarter of 2015, rather than the final three months of that year. This is earlier than expected, which explains why USD/JPY has been given a lift.

The ¥101.20 level remained the low throughout February and March, which means we are likely to see a retest of the March high just above ¥103. Should that be breached, the ¥105 level comes into play. On an hourly chart the currency cross is heading towards overbought territory, but on a daily chart the 200-day moving average continues to point upwards. The bias remains to the upside for the time being.

Spot FX USD/JPY chart

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