Yellen strikes the right balance in her speech

The main event of the week has come and gone and left markets still uncertain on the future of tapering going forward.

Incoming Fed chair Janet Yellen seems to have struck the right balance – the US dollar did not sell-off on her comments while US equities rallied to record levels. Whilst acknowledging the economy is significantly stronger and continues to improve, she said the US economic recovery is still fragile and as a result, prematurely pulling aid could derail the recovery. This was not really fresh news and traders didn’t add to US dollar shorts.

Yen weakness persists in Asia

The US dollar index just held onto the 81 level, with yen selling being the most notable move for the USD. USD/JPY pushed through ¥100 and has continued its run in Asia with a high of ¥100.26. A slower reading for Japan’s Q3 GDP saw talk of further stimulus from the BoJ ramp up along with comments by Finance minister Aso who said FX intervention is a policy option.

There is nothing on the economic calendar for Japan today but the price action in the pair is definitely interesting. There could be some resistance coming up in the ¥100.60 region which is the September high. Out of the US later today we have the Empire State manufacturing index, import prices and industrial production to look out for.

USD/JPY

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.