Hello my beautiful forex traders! I’m so grateful for having you here. The U.S. Federal Reserve members are probably also very grateful for having millions of market participants analyzing their E.V.E.R.Y word in their recent statement. I laid out the many different FOMC statement scenario’s in my previous update, and thankfully one of them was the case. I guess I must be a genius! It makes me wonder…How would it feel to know you have such power over people? That millions of investors are making investing decisions based on what you say? I guess I won’t know unless I break and enter then next Fed meeting. Watch out Janet! Here comes Kiana.
Anywho, the Fed has spoken and the traders have responded. Furthermore, the US GDP and unemployment claim numbers are out. Now that the dust is settled, it could be a good time for Invest Diva’s to take a look at the markets from a longer term perspective. Today we are looking at the US dollar (Mr.USA) versus the Japanese Yen (Ms. Yen) on the forex dance floor.
1- US Economy Has Been Expanding at a Moderate Pace
The Federal Reserve FOMC statement, after the two day meeting which ended Wednesday, said that business and household spending is solid from their earlier assessment that it is just moderate. Even with the recent downturn in hiring, the FOMC maintained that “labor market indicators, on balance, show that underutilization of labor resources has diminished since early this year.”
2- Fed Expects the Economy to Continue Expanding
The statement said that the Committee expects that, with appropriate policy accommodation, “economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. ”
Perhaps the wording that got market participants the most excited was that the Fed is just “monitoring global economic and financial developments” for now, unlike their September statement which said that concerns “may restrain economic activity somewhat.”
3- Neither Nay or Yay for December Rate Hike
All’n’all, the latest FOMC statement has left an impression on the market that we are moving closer to an interest rate rise in the US. Subtle changes in the wording of the statement from the previous one, such as talking about the possibility of raising rates at the next meeting (which takes place in December), instead of the less explicit mention of “how long to maintain” the status quo, and removing a previous reference to global economic and financial developments possibly restraining economic activity, have excited market participants.
4- US GDP Growth Slowed after Fed Statement
Ouch! That must have hurt. On the FOMC news, Mr. USA got high and up right after the statement and then lost momentum. Then, he was smashed by worse than expected Gross domestic product (GDP) reading.
U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut. GDP increased at a 1.5 percent annual rate after expanding at a 3.9 percent clip in the second quarter. Some analysts expect the inventory drag to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals.
I feel bad for Mr. USA for being teased so much! But guess what, now could be a good time to get into a USD trade. Today I’m looking at her dance moves versus the Japanese Yen (JPY).
US Dollar/ Japanese Yen LOVES to Range
The Japanese are not known for taking surprise actions when it comes to their economy, at least comparing to some other nations in Asia (cough, China). And the Japanese politician have made it clear that they like their currency rate stable, similar to how they like their girls.
The Japanese Monetary Policy Statement as well as BOJ Press Conference is scheduled for Friday during the Asian session,but we are not expecting too much of a surprise.
As I mentioned in my previous Japan economy update, the Bank of Japan (BoJ) minutes from their meeting in September showed that policymakers last month confirmed the importance of continuing to closely monitor effects from slowing growth in emerging economies, including China, on the global economy.
Technical Points
Since I lasted covered the USD/JPY pair back in September, there has been…. NOTHING NEW! The pair continues to bounce back and force withi the new range between 121.50 and 118.50. Testing the 23% Fibonacci level over and over again.One new development was the recent break above the Ichimoku cloud, which could indicate more upward pressure on the pair. This may have lifted the range between new levels of 120 and 121.50, with an extended target set at 123. We are still awaiting that break above 121.50… which could only happen if the Fed gives an ultra bullish trading signals.
If you are thinking of joining the range trading crowd, make sure you have your stop loss order in place so that your account doesn’t get carried away by unexpected market reactions. In any case, use the following support, resistance and pivot levels for calculating your profit taking target, your leverage and exit strategy.
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 118.50 | 120 | 123 |
| 116.50 | 121.50 | 125 |
Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.
