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USD/JPY Signal - Janet Yellen’s Speech - 23 Mar 2017

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Expiry Time: 
21:00 GMT
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Janet Yellen, the Federal Reserve chair will be speaking today at a scheduled event. Her comments are likely to see some kind of reaction from the markets in an otherwise quiet trading day. Any hints of hawkish remarks from the Fed Chair could spur a strong reaction from the U.S. dollar crosses. USDJPY in particular can be expected to bounce back especially after the currency pair fell to a 4-month low this week.

The U.S. dollar first came under pressure since the Fed hiked interest rates last week by 25 basis points. Investors sold off the U.S. dollar due to the fact that the Fed maintained its view for keeping two more rate hikes this year. The markets were expecting to see the Fed project an additional rate hike. As a result, many viewed the Fed's statement in March as being dovish, leading to the selloff. The central bank also did not make any significant changes to the economic projections and stuck to the projections it gave in December last year.

Another factor contributing to the decline in USDJPY was the speculative Trump trade. Investors started to purchase the U.S. dollar since November last year after the Republican candidate Trump won elections. His campaign promises off tax reforms along with increased infrastructure spending sent the markets into frenzy. Investors expected the measures to contribute strongly towards inflation and GDP growth.

In mid-February, President Trump promised to announce plans on the tax reforms but it was delayed. Nearly a month later and with no fresh inputs on the proposals, the markets were seen scaling back their bullish bets which led to the decline in USDJPY which as more accentuated this week. Therefore, in light of the above, a hawkish rhetoric from Ms. Yellen will be required to push back the U.S. dollar higher.

In terms of binary options trading opportunity, it is ideal to purchase daily CALL options near 111.25 for an end of day expiry time. The current dip could potentially form a higher low in prices and could see USDJPY closing higher as a result. Therefore purchase daily CALL options for end of day expiry time at 21:00 GMT.

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.