USD/JPY is on a tear this morning. US equities is also trading higher which is completely mind boggling given the fact that US economic data was very weak and Fed Chairman Ben Bernanke warned that we may not be looking at a recovery in the US economy until 2011 or 2012.

There could still be more surprises in Bernanke’s testimony, which is only beginning as he will be facing questioning by the members of the Senate. Although the Q&A session could set the tone for trading this afternoon, the USD/JPY rally has been voracious. Unless there are new revelations from Bernanke, USD/JPY could be headed to 98. The level that it needs to hold above for this to happen is 96.15, the 38.2 percent retracement of the August to January sell-off.



Kathy Lien is Director of Currency Research at GFT, and runs KathyLien.com.