EURJPY – Breakout on Yellen?

EURJPY – Breakout on Yellen?

Chart Of The Day

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.

Will Yellen Save The Dollar?

Will Yellen Save The Dollar?

Chart Of The Day

The last two days have been brutal to dollar bulls as risk aversion flows have blown all dollar long positions to bits. The shorts are already calling for the funeral of the dollar rally and even Goldman Sachs had to cover its long dollar trades for a -5% loss. But before currency traders jump on the sell the dollar bandwagon they may be wise to wait for Janet Yellen’s testimony.

Tomorrow the Fed Chair is due to testify in front of Congress and she may want to defend her hawkish stance by minimizing the current turmoil in capital markets and maintaining her view that further tightening may be necessary. If she remains resolute in face of this week’s events, sentiment in the market may shift and all the late dollar shorts could find themselves wrong footed.

In addition to fundamental factors that could slow the EUR/USD rally, the pair also faces formidable resistance at the 1.1300-1.1400 level and is likely to find more long term sellers in that zone