There have not been any significant movements today in the FX market. The USDJPY pair was trading flat ahead of the US session; last spotted some pips above the psychological 110 hurdle. Everyone is taking a break ahead of today's highly anticipated Jackson Hole Symposium speeches.
Powell in center of attention
Today's critical event starts at 4 PM CET when Federal Reserve Chair Jerome Powell speaks about the economic outlook and monetary policy at the Jackson Hole Economic Policy Symposium. In addition, Powell is expected to offer guidance on when is the central bank ready to start tapering its massive QE program.
The official consensus calls for the start of tapering in November. Therefore, if Powell turns dovish and refrains from stating the official tapering date, it could be a piece of very negative news for the USD. Alternatively, if he confirms November, or possibly September, it might send the greenback sharply higher.
Volatility will most likely be highly elevated . Thus, traders should avoid the initial spikes up and down and wait for the situation to become more apparent.USD/JPY has, in 2021, reverted to closely tracking interest rate differentials, notably the 2y2y rate spread. At the very least, that's a warning that if the Fed is successful in escaping the zero-rate bound (and Japan isn't), USD/JPY could be in for a break higher.
Thursday's hawkishness by Bullard
On Thursday, **Jim Bullard told CNBC that The Fed should "get going" on the taper and that he expects it to end its bond purchase scheme by Q1 2022.**Bullard also noted that "getting taper done early gives the Fed options on raising rates." Lastly, Bullard stated that "financial stability concerns are a good reason to taper."
Nevertheless, the USD/JPY pair failed to capitalize on those comments and slipped below the critical 110 level.
The US calendar will offer personal income and spending figures, along with the PCE inflation indices. Lastly, the Michigan Consumer Sentiment Index will be released, but it will only revise the previously published number earlier in the month.
Technically speaking, boredom continues
From the technical point of view, nothing new has happened here. The pair has not moved anywhere in the last six months, and volatility has been steadily declining.
The initial resistance could be found at the short-term downtrend line, currently at 110.25 , and if the price jumps above it, a bullish momentum might accelerate. However, the area near 111 has been unbreakable by bulls, and therefore it remains the primary resistance. Only a successful break above July's highs of 111.50 could lead to a notable leg higher above 112.
On the downside, if today's Powell speech disappoints traders, It seems that the vital support lies at 109, where the recent declines have stopped. Should the dollar drop below 109, the medium-term could change to bearish, possibly leading to a test of the 200-day moving average near 108.