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USDJPY – Back to the Lows?
Well Janet Yellen couldn’t have hurt the dollar more if she tried. Her latest speech made it perfectly clear that the Fed is going to be extremely cautious in normalizing monetary policy as its remains far more concerned about global capital markets rather than any inflationary pressures at home.
Ms. Yellen made it perfectly clear that for the time being the Fed will ignore most of the fundamental data and will likely remain stationary for the foreseeable future. The Fed funds futures are now pricing in 100% chance of a rate hike only by December of this year.
Ms. Yellen’s dovish posture creates a set of asymmetrical risks with respect to this week’s data. Any positive data may be minimized on the assumption that the Fed will not act anyway, and any negative surprises will only continue to weigh on the dollar.
Yet despite the negative sentiment USD/JPY remains in an uptrend and only a break below the 112.00 mark would rupture the current trendline. That’s why despite all the negative news the pair may still be a buy the dip story as long as it can hold those levels