FOMC as expected; markets extremely volatile during presser.

The FOMC hiked rates by 75bps today, as expected. The statement was similar to that of July's. However, the accompanying “dot plots”, which show where FOMC members think interest rates are headed, were much higher than the previous one. In addition, inflation forecasts were revised higher and growth forecast were revised lower. See our complete FOMC recap here. As a result of these actions, the US Dollar continued its bid higher as the DXY reached its highest levels since June 2002 at 111.58. In addition, stock markets and bonds both tumbled as yields rose. 2-year yields reached as high at 4.12% and the 10-year yields reached a high of 3.64%. Gold also reached its lowest levels since April 2020.

However, during Fed Chairman Powell’s press conference which followed, traders reversed price action on many of these instruments in what may be considered “Buy the rumor, sell the fact”. This has been consistent with the price action after some of the recent FOMC meetings. As such, the US Dollar pared earlier gains and stocks and bonds bounced. Gold blasted $35 higher during the press conference.

With that in mind, let's turn out attention to USD/JPY. Upon release of the FOMC statement, the pair caught a bid as both the US Dollar and US yields began to move higher. However, during the press conference, both the US Dollar and yields began to move lower, while USD/JPY reversed and dropped from 144.70 down to 143.40.

Source: Tradingview, Stone X

On a daily timeframe, price traded near the September 7^th highs of 144.99, however, as mentioned, was pulled lower by the reversal in the US Dollar. However, USD/JPY is still making higher lows as price tries to take out the recent highs. This sideways price action over the last two weeks has allowed the RSI to unwind and move back into neutral territory. This could be giving the pair the “all clear” to move higher. Resistance above the 144.99 level is at 147.65, which is the highs from August 1998. First support is at the lows of September 9^th at 141.50. Below there, price can fall to support at the July 14^th high of 139.39, and then a confluence of support at recent lows and an upward sloping trendline dating to March 31^st at 135.80.

Source: Tradingview, Stone X

As for other central bank meetings, within the next 20 hours markets will hear from the BOJ, SNB, Norges Bank, BOE, and SARB. Will traders’ reactions be the same as that of the reaction to the FOMC? Possibly. Traders may be in for a wild Thursday. Manage risk accordingly!

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. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, 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 StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.