Awaiting Bernanke’s speech - 19.6.2013
The day everybody was waiting for has come. The two-day meeting of the Federal Open Market Committee is to be ended today, and the Fed Chairman, Ben Bernanke’s speech at the press conference is going to be a culmination of the day. Of course, we do not expect an immediate change in policy from the regulator, but the markets are loaded with speculations of possible beginning of reductions in quantitative easing (QE) in 4-5 months.
As for Bernanke's today statement, he probably would not articulate the terms and pace for possible reduction in stimulating policies. We will try to hook an indirect evidence of the QE reducing possibility or simply a lack of such a possibility denying, while listening to the traditionally low-key speech.
The US economy keeps showing recovery signs, although slowly, but noticeable anyway. We expect that this tendency will intensify in the second half of the year and will provide support for the dollar. By the way, according to the data released earlier, inflation in the US rose in May to 1.4%, compared with 1.1% for the previous month.
Before the Fed meeting ends, we observe a lull in the markets and it is no surprise. The currency pairs are trading within yesterday ranges. The US dollar index has been stuck at 80.50 within four last trading days, as though preparing to reverse. Generally, in case Mr. Bernanke's speech sounds with no denying any QE program reduction plans, along with heart-lifting economic recovery forecasts, the short-term USD trend reversal is possible indeed, which’s index has been steadily falling in the first half of June.
In this regard, it seems particularly attractive restoring the long positions on the USD JPY. The pair showed a significant correction in June, stopped at the moment before the significant support at 93.50 (61.8% Fibonacci level), therefore, in case the expectations concerning changes in monetary policy of two CB’s get higher, we can see the pair retesting the level 97.00, and then 100, in case of success.