Top Story

USD/JPY Probes 10-Week High Ahead of Wednesday’s Fed Meeting

Political news has dominated today’s headlines on both sides of the Atlantic.

In the UK this morning, Brexit Secretary Raab reiterated that he was confident that a trade deal with the European Union, surprising absolutely no one, though rumors of a potential snap election in November certainly caused some traders to raise their eyebrows.

Meanwhile in the US, rumors swirled that Deputy Attorney General Rod Rosenstein was quitting his post before getting fired…then that he was refusing to quit and would have to be fired…and now ultimately will remain in his post until at least Thursday, when he will meet with President Trump once again.

The news hit risk assets hard, as it could prompt a potential constitutional crisis if the next Department of Justice ranking member (Solicitor General Noel Francisco) tries to shut down Special Council Mueller’s investigation of the President. As of writing, all major US indices are in the red and the so-called “commodity dollars” (CAD, AUD, and NZD) are among the worst-performing major currencies on the day.

Interestingly, the “safe haven” yen hasn’t caught much of a bid on the headlines. In fact, USD/JPY is trading higher on the day to test Friday’s 10-week high in the upper-112.00s. Technically speaking, the pair remains in an uptrend on both a medium term and short-term horizon, as the chart below shows. Rates have formed a “rounded bottom” of sorts over the last two months, and bulls have now turned their eyes to July’s intraday highs around the 113.00 handle, which also marks the highest level the pair has traded at since the first week of the year. A confirmed break above the 113.18 level could expose the highs from May, July and November 2017 above 114.00 next.

Source: TradingView, FOREX.com

Beyond political headlines, Wednesday’s FOMC meeting may be the biggest market mover of the week. Even though the central bank’s presumed plan to raise interest rates another 25bps has already been completely discounted, traders will closely parse the accompanying statement, economic projections, and press conference with Fed Chair Powell for insights into how likely the Fed is to raise rates in December (currently priced at about an 80% probability according to the CME’s FedWatch tool) and how many times Powell and Company plan to hike rates in 2019.

Stay tuned for our full FOMC preview and recap tomorrow and on Wednesday!


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.