USDJPY broke through the 99 barrier overnight before backing off, but the pair may rally again today if US new home sales are strong, and especially if the Fed offers up any new hints about near-term policy.

It's been another listless session on the final trading day of the week with only USDJPY and GBPUSD showing any movement whatsoever, while other major currencies remained in the typical summer slumber.

In Asia, USDJPY managed to break through the 99.00 barrier on the back of a strong rally in the Nikkei, which closed the day up more than 2%. USDJPY has been consistently bid since the release of the Federal Open Market Committee (FOMC) minutes this past Wednesday, which revealed that most of the members were ready to consider tapering, although some had reservations about the timeline.

Nevertheless, consensus seems to be building that the Federal Reserve will make a move sooner rather than later, and currency traders will look for any clues from the ongoing Jackson Hole symposium to gauge the Fed’s near-term intentions.

This may be yet another false dawn in USDJPY, as US data remains decidedly mixed, and the Fed will no doubt look for further guidance from the August non-farm payrolls (NFP) report before making any definitive decisions about tapering.

USDJPY backed off the 99.00 figure in mid-morning London trade, but the pair may resume its climb later today, especially if US new home sales beat expectations. Wednesday's existing home sales report showed a strong increase in units sold, indicating that demand in the housing market remains robust despite the uptick in rates.

Still, the true driver of USDJPY trade will be the Fed, which means that traders will keep a keen eye on the happenings in Wyoming for the rest of the day.

GBP/USD Facing Stern Resistance

Meanwhile, in the UK, the second revision of GDP data printed a bit better than expected, coming in at 0.7% versus 0.6% expected. Exports gained the most in more than a year, and net trade contributed 0.3%. Overall, a pickup in manufacturing and construction helped to drive growth. Manufacturing grew by 0.7% versus 0.4% forecast and construction was revised 1.4% higher from 0.9% initially projected.

See also: A Surprise Warning About the UK Economy

The news bodes well for the British pound (GBP), as the better-than-expected UK growth figures suggest that the need for further quantitative easing (QE) has diminished. GBPUSD popped above the 1.5600 figure to trade as high at 1.5638, but it has since retreated from the highs as profit taking continues to dog cable.

GBPUSD faces very stiff resistance at the 1.5700 level, and despite today's positive news, the pair may have a difficult time rallying in these late-summer markets.

With no major news on the economic calendar for the rest of the day, currencies may continue to tread water, but they remain vulnerable to any offhand comments from Jackson Hole, and therefore, sharp price moves remain a very real possibility as the day progresses.

By Boris Schlossberg of BK Asset Management