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One the best summaries of this week came from a tweet we saw today. It said simply,” Who cares what happened today, Yellen speaks tomorrow.” Certainly this week’s price action has been akin to watching paint dry as currencies have essentially remained at a standstill as traders await the signal from Fed Chair Yellen.
No cross has exemplified this state of suspended animation more than the EUR/JPY pair which has been in a 100 point range for the past 10 trading days. Tomorrow’s speech however could change all that. If Ms. Yellen once again fails to convince the market that a rate hike is coming USD/JPY is likely to tumble hard taking EUR/JPY along with it. On the other hand, if she finally sounds like she is ready to commit to tightening EUR/JPY could rally 100 points in a heartbeat. A break to the upside would take EUR/JPY through 114.00 and higher while a breakdown could push the pair as low as 110.00 over the next few days.