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Currency Analyst since 2010

USD/JPY: events and levels to watch

USD/JPY was supported this week by the levels just above the key psychological level of 100.00 yen, but stayed below 101.00 on the upside.

On the one hand, US data released on Tuesday were positive: consumer confidence improved and flash services PMI exceeded expectations. In addition, Japanese players bought US currency ahead of Japan’s September 30 interim book closing for the fiscal year. On the other hand, the Federal Reserve’s Vice Chairman Stanley Fischer limited the greenback’s recovery by saying on Tuesday that the Fed shouldn’t raise interest rates too much.

On Wednesday we’ll hear more from the US central bank: Chair Janet Yellen will testify before a Congressional committee, though she’s expected to speak mainly about financial regulation. Speeches of other FOMC members are scheduled today as well: Loretta Mester, Esther George, James Bullard (voting members) and Charles Evans, Neel Kashkar (don’t vote on the Fed’s policy this year). According to Barclays, we’ll hear hawkish comments from Mester and George, while Evans should be dovish. Bullard is not expected to make comments on monetary policy.

If USD/JPY slides below 100.00, we’ll likely see it touch 99.00. Note that in this case Japanese officials will try verbal interventions to support the pair. More sellers should appear if the bulls attempt to get to 102.00 (2016 resistance line). Goldman Sachs notes that USD/JPY is now close to its fair value. As a result, the pair needs strong drivers to leave the current range.  

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