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- Current Market Situation:
- At the start of the week, USD/JPY dipped to the 139 range, marking the lowest level for the yen since July last year. Although it has since recovered to the 140 range, there remains strong selling pressure on the dollar amid uncertainties surrounding the upcoming FOMC and BOJ meetings.
- FOMC Expectations:
- Last week, a 25bp rate cut was anticipated for the FOMC. However, recent comments from Fed watchers have revived speculation about a potential 50bp cut. Currently, the CME FedWatch tool shows approximately 60% probability for a 50bp cut and 40% for a 25bp cut.
- Key Events This Week:
- FOMC Meeting:
- Market volatility is expected to increase as the FOMC meeting approaches. The uncertainty around the extent of the rate cut is likely to keep the USD in a volatile range until the announcement.
- BOJ Meeting:
- The BOJ is expected to maintain its current policy stance without additional rate hikes. Focus will be on any signals regarding future monetary policy adjustments based on recent comments from BOJ board members.
- FOMC Meeting:
- Trading Strategy:
- With the FOMC and BOJ meetings on the horizon, market conditions are expected to remain unstable. For USD/JPY, there may be further downward pressure if it breaks below 140. Traders should be cautious and focus on range trading while being prepared to adjust based on key economic indicators and official statements.
- Other Key Economic Indicators:
- Swiss Producer Import Prices (August)
- Eurozone Trade Balance (July)
- New York Fed Manufacturing Index (September)
- Canadian Manufacturing Sales (July)
- Upcoming Speaking Events:
- Panetta (Bank of Italy Governor), De Guindos (ECB Vice President), and Lane (ECB Chief Economist) are scheduled to speak.
Key Points to Watch:
- The USD is expected to remain volatile and range-bound leading up to the FOMC. Focus on range trading strategies and remain flexible in response to economic indicators and central bank communications.