Markets quiet ahead of Yellen speech for rate hike direction

Sydney session ends off on a quiet note as the market takes no significant positions ahead of the 10 a.m. Fed’s speech providing further indication for rate hike expectations in 2017.

Here are the current expectations:

  • Incremental rate hike likely as economy nears full employment and inflation holding strong
  • Unemployment rate currently sits at 4.8% and inflation at 2.1%
  • China’s January inflation data provides optimism for global growth stimulus
  • President Trump poses risk to counter Asian currency “manipulation” devaluation

Since yesterday’s short sentiment on a supply zone test, USDJPY has sold off nicely in the middle of the Tokyo session.

screenshot-at-feb-14-00-47-48
USDJPY 1-Hour

As of the moment, I expect to keep this setup to the short term and exit prior to Yellen’s speech. Rate hike optimism is expected to be a bullish signal for the U.S. Dollar, especially after a successful weekend meeting between President Trump and Prime Minister Abe.

Currently, I am in a EURJPY short trade on a technical level break-out:

screenshot-at-feb-14-00-55-33
EURJPY 1-Hour
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