Is the USD/JPY about to drop lower on a very dovish Fed?
Today, the eyes of the market will be on the Fed rate decision. And due to the yield sensitivity of the JPY, we want to focus on the USD/JPY.
After the weak NFPs, and the dovish comments from Fed chairman Powell around two or so weeks ago, combined with markets aggressively pricing in three rate cuts from the Fed until December - and we increasingly expect the first steps in that direction today. However, such expectations cooled a bit over yesterday, in response to the Atlanta Fed Tracker jumping to 2.1% from 1.4% after last Friday's Retail Sales data.
While the US dollar gained some momentum against the Euro or GBP, the JPY traded stable against the dollar which seems to come as a surprise, probably suggesting that bond and JPY traders are still very careful and consider a surprising cut from the Fed a serious option.
That said, any dovish rhetoric and/or surprising rate cut today is a potential bearish driver for the USD/JPY, leaving the currency pair vulnerable to a significant drop below 108.00 respectively the significant support region around 107.50/70.
Such a break lower levels the path down to the January Flash Crash lows around 105.00, especially if in addition to this outlook geopolitical tensions between the US and Iran keep on rising, triggering a risk-off move and leaving market participants unwinding their carry trades in JPY.
Technically speaking a drop lower stays an option as long as we trade below 110.70 on a daily time-frame.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
After the weak NFPs, and the dovish comments from Fed chairman Powell around two or so weeks ago, combined with markets aggressively pricing in three rate cuts from the Fed until December - and we increasingly expect the first steps in that direction today. However, such expectations cooled a bit over yesterday, in response to the Atlanta Fed Tracker jumping to 2.1% from 1.4% after last Friday's Retail Sales data.
While the US dollar gained some momentum against the Euro or GBP, the JPY traded stable against the dollar which seems to come as a surprise, probably suggesting that bond and JPY traders are still very careful and consider a surprising cut from the Fed a serious option.
That said, any dovish rhetoric and/or surprising rate cut today is a potential bearish driver for the USD/JPY, leaving the currency pair vulnerable to a significant drop below 108.00 respectively the significant support region around 107.50/70.
Such a break lower levels the path down to the January Flash Crash lows around 105.00, especially if in addition to this outlook geopolitical tensions between the US and Iran keep on rising, triggering a risk-off move and leaving market participants unwinding their carry trades in JPY.
Technically speaking a drop lower stays an option as long as we trade below 110.70 on a daily time-frame.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.