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Post FOMC: Stocks down, dollar up and above – BBH

FXStreet (Delhi) – Research Team at BBH, suggest that the S&P 500 has fallen around 5.75% since the post-FOMC high while the dollar has risen against most currencies in the same period with notable exceptions being the Swiss franc, which strengthened dramatically after the SNB lifted its cap on the currency. The yen has also risen against the dollar this year, though its only 0.13% rise.

Key Quotes

“It is a misleading question to ask what is the correlation between the dollar and the stock market. The dollar does not exist like that. The dollar's value is only known in terms of something else, such as against the euro or yen. Using the Dollar Index lends itself to confusion because of its weighted components. It is also not particular rigorous to eyeball the time series to claim a correlation, which is a statistical relationship.”

“Both the euro and yen are inversely correlated with the S&P 500. Both correlations appear to be near extremes though the 30-day correlations are even more extreme. While recognizing that the inversion can become deeper, these levels do not seem sustainable. The correlations are likely to become less inverse in the period ahead.”

USDJPY: Neutral bias for the coming week – MUFG

Research Team at MUFG, suggest that the USDJPY pair is likely to trade with neutral bias in the coming week within the range of 118.50-121.50 while looking for more evidence that economic slowdown in China undermining Japan’s economy.
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USD/JPY bounces-off 120, back to square one

The US dollar recovered a brief dip to 120 levels and now reverted to familiar range versus the yen in the late-Asian session, as the rebounding Japanese stocks boosted the market sentiment amid persistent broad based US dollar backed by Fed Yellen’s comments.
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