USD/JPY bulls eye 114.75 recent highs ahead of FOMC

The statement has been considerably shortened since Jerome Powell took over as Chair, and not a great deal has happened on the macro front to change t  |  08/11/2018 17:54
  • USD/JPY is perky ahead of today's FOMC as the dollar continues to flex its muscles on a grind through the 96 handle from 96.09 to 96.38 high. 
  • Currently, USD/JPY is trading just a few pips below the psychological 114 handle at 113.95, from a low of113.46 and a high of 113.97.

The statement has been considerably shortened since Jerome Powell took over as Chair, and not a great deal has happened on the macro front to change the assessment of the outlook. 

US stocks are taking a breather ahead of FOMC as the pair rests through key 113.80 Fibo level. USD/JPY maintains its form as we move into the FOMC in a dollar positive environment following yesterday's post-US election-bid for US denominated asset classes. The pair has risen through key technical levels since taking on the 113 handle while investors get back to good old-fashioned economical driven influences and support the dollar on interest differentials.

FOMC outlook

While traders expect the Fed to remain on hold today,  on the FOMC, Bill Diviney, Senior Economist at ABN AMRO suggests that today’s statement is likely to be received in a muted fashion markets, with probably only minimal changes:

"From next January, Chair Powell will hold a press conference after every FOMC meeting, not just on the quarterly projections meetings and  the timing of the move to increased transparency could prove to be pertinent, as for the first time in years the Fed is likely to be signalling a shift in its policy path in 2019."

"Our base case is that the June 2019 rate hike will be the last one in this cycle. As we approach that time, the FOMC will want to signal – both through its ‘dots’ rate projections and through public commentary – that we are approaching the end of the rate hike cycle. A higher frequency of press conferences should give Chair Powell ample opportunity to gradually prepare the market for such a shift."

USD/JPY levels

The technical lean bullish and the 114.74 recent highs are in focus. Analysts at Commerzbank argue that a break above 114.74 would target 118.66, as the December 2016 high:

"The market is underpinned by the 55 day ma (112.40) and cloud support (112.93/15). Only failure at the cloud support (112.15) would target the 109.77/110.00 200 day ma and August low. Where are we wrong? If the 109.77 level were to give way (August low), 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.USD/JPY remains bid and we look for further gains to the 114.74 recent high. Above 114.74 would target 118.66, the December 2016 high."

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