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USD in focus ahead of Janet Yellen's speech

Four key markets in focus today: USD/JPY, EUR/USD, US 500 Cash and Australia 200 Cash.

USD
Source: Bloomberg

USD/JPY

The USD will be in focus heading into the weekend, with Janet Yellen’s speech likely to result in some volatility. Primarily driven by USD gains, USD/JPY has been bid all week and managed to print a high of 103.95. Additionally, US economic data has actually been quite encouraging along with modestly hawkish FOMC meeting minutes.

The pair is now looking for a catalyst to take it through the 104 barrier. If Janet Yellen’s comments come in fairly hawkish, then this might just be the catalyst the pair needs to knock through that barrier. The market broadly expects Yellen to continue sounding her dovish tone and any switch from this could trigger a move. A concern is the fact the pair is in overbought territory at the moment with the RSI at 78. A dovish Yellen will likely trigger some profit taking.

EUR/USD

The reversal in EUR/USD has some traders wondering whether the pair is oversold and whether we might be in for a near-term reversal. The RSI had dipped below 30 and is now crossing back above 30. This is always a sign the near-term trend might be exhausted, which might encourage some profit taking on shorts and result in a short squeeze. Resistance is at 1.333 - in the region of recent lows.  Mario Draghi’s speech later today will be the key event for the single currency and could trigger volatility.

US 500 Cash

The S&P 500 rose to a new closing high and logged a 28th record this year. With data good all round, investors remain encouraged. Focus will now switch to Jackson Hole and Janet Yellen’s speech, where a less dovish tone may trigger some near-term weakness. However, should Janet Yellen continue her dovish stance, there could be room for the S&P 500 to extend its gains.

Australia 200 Cash

The local market traded at a six-year high of 5679.5 but the move was short-lived as profit taking resulted in a swift reversal to close near the day’s lows. This pin bar reversal candle sometimes spells a near-term trend reversal and could weigh on sentiment in the near term. There’s also a resistance line that kicks in around the 5670 region and any moves to that level could be used as an opportunity to initiate selling. While the market is likely to open higher today, there is a risk we could see selling kick in through the day. 

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