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USD/JPY: Bears in charged ahead of FOMC

  • USD/JPY has stablised in as we enter the pre FOMC trade in New York.
  • All are counting on the Fed, but the moves in the markets prove that it may not matter what the Fed does for the yen.

USD/JPY has stablised in as we enter the pre FOMC trade in New York, with the price picking up from a fresh low down at 112.13 in pre-Fed jitters following the supply felt in Tokyo overnight. USD/JPY fell on the back of the Nikkei plunging with Softbank plunging by over 10% that helped the index travel through the October 26th low.

The pair pieced the prior December 6th lows at 112.23, a static support line. All are counting on the Fed, but the moves in the markets prove that it may not matter what the Fed does, as ultimately, risks are skewed in the yens favour no matter the outcome. 

Fed outlook

The Federal Reserve is expected to lift short-term interest rates by another 25bps, which would bring the target band up to 2.25%-2.50% — the highest level since March 2008. However, a lot is counting on what Jerome Powell, Chair of the Federal Reserve, now says. He may offer some guidance on how committed the Fed is to any further tightening, depending on data.  Indeed, Powell will have the difficult task of delivering a dovish hike, while remaining positive about the economic outlook

USD/JPY levels

Analysts at Commerzbank explained that USD/JPY has eroded its 3 month uptrend and sold off to the 112.23 6th December lo and intraday Elliott wave counts are negative:

"The near term risk is for failure and a slide back to the 200 day ma at 110.86 then 109.77, the August low. If the 109.77 August low were to give way, the June 8 low at 109.20 would be in focus. Failure there would imply a slide back to the 108.12 May 29 low and the mid-February high at 107.91."

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