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USD/JPY binary signal - FOMC's Yellen Speech - 26 Sep 2017

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Expiry Time: 
20:00 GMT
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The Federal Reserve Chair, Janet Yellen will be speaking today at 16:45 GMT. The speech from the Fed chair comes a week after the Fed's FOMC meeting. While interest rates were left unchanged, the FOMC signaled that it will begin its balance sheet normalization process from October. The FOMC also said that interest rates could be hiked one more time this year by December.

The market reaction initially saw the U.S. dollar posting some gains. However, towards the close, the dollar was seen giving up the FOMC gains. Yellen's speech today could bring further clarity for the markets.

According to the rate hike odds, the markets have currently increased the odds of a rate hike to above 50%. It was just below 22% prior to last week's FOMC meeting. Still, there are a lot of uncertainties surrounding the proposed rate hike. For one, inflation continues to remain tame. Although the latest inflation report showed an increase of 1.5% on the year, this is still below the Fed's 2% inflation target rate.

Inflationary pressures in the U.S. also remained broadly sluggish with no signs of underlying pressure. While the markets will be focusing on this, the Hurricanes that hit the U.S. over the month is expected to push inflation higher in the short term. The Fed made a mention of this in the FOMC statement released last week and also said that there could be downside risks to economic growth.

However, the effects of the hurricanes are expected to remain limited and this includes inflation potentially sliding back as well. For the moment, the Fed remains optimistic that inflation will rise in the longer term. The 5 year inflation expectations currently remain anchored at 1.8%. This is still short of the Fed's 2% inflation target.

Based on the above, today's binary options signal is USDJPY. The currency pair has managed to post a strong rally and price action remains well anchored near the top end of the rally. The consolidation could potentially see some sideways price action but the bias is shifting to the downside.

We are looking to purchase daily PUT options at 111.80 for a 20:00 GMT expiry time. We expect USDJPY to break down below this short term support level and could close lower on the day.

binary options signal 26 Sep 2017

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. 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. All risks and coasts associated with online trading are your responsibility.