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USD/JPY binary signal - Fed's Yellen speech - 27 Jun 2017

Signal details
Entry Price: 
111.60
Close Price: 
112.17
Direction: 
Low
Expiry Time: 
20:00 GMT
Result: 
OTM
How we trade
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Janet Yellen, the Chair of the U.S. Federal Reserve will be speaking today at the British Academy. Her speech is scheduled for 1700 GMT. Ms. Yellen is likely to touch upon on the Fed's monetary policy plans which are crucial for the markets at this point in time.

Given the weak string of economic data in the past month, the markets are currently unsure whether the Federal Reserve will continue with its policy tightening cycle. One of the FOMC members, St. Louis Fed President James Bullard gave a dovish view from his perspective.

Bullard told reporters that given the recent weak inflation figures, the Federal Reserve has the option to hold back on its policy tightening in order to see inflation push higher to the 2% target.

After a brief spell of inflation rising to 2%, consumer prices have fallen rapidly. The decline in the inflation came on account of falling oil prices. Oil prices fell despite OPEC's decision in May to maintain the production cut levels. However, this lack of supply was seen being made up by the U.S. shale oil producers. This brings the oil market in a continued state of oversupply.

With oil and inflation tightly related, continued decline in oil prices could potentially upset the Fed's plans for interest rate hikes. At the June meeting, the FOMC said that it will hike interest rates one more time this year. The Fed also said that it will begin to unwind its balance sheet at a rate of $10 billion per month, which is another form of policy tightening.

Given the above, today's binary options signal recommendation is USDJPY. The currency pair has repeatedly struggled to break the resistance level at 111.61. We expect to see a decline off this resistance level in the near term.

Therefore, we would purchase daily PUT options in USDJPY at 111.60 for a 20:00 GMT expiry time. We expect that USDJPY will fail to continue to the upside above the resistance level and therefore push lower into the day.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.