Market Beat: Yen Continues Wild Trading Before the FED Decision

July 27, 2016

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This article is originally referred from FXGlobe Daily Analysis

Market Beat: Yen Continues Wild Trading Before the FED Decision

The Japanese Yen had an incredibly volatile last 36 hours as the safe haven currency rose significantly against all of its major counterparts on Tuesday but rebounded strongly today in early trading. Today’s move was triggered by yet another rumor about an imminent new round of fiscal stimulus by the government that was quickly denied by authorities causing a sharp rise again in the value of the Yen.

Oil fell yet again on Tuesday as we expected and the commodity is dipped below $42.50 this morning. Commodity currencies were surprisingly strong again despite the ongoing weakness in the most traded commodity, although both the New Zealand Dollar and the Australian Dollar dipped slightly today after yesterday’s strong session. The Canadian Dollar recovered below 1.32 compared to the U.S. Dollar and the late-day rebound by oil continues to support the currency today.

USD/JPY (current price: 105.53  )

The pair traded as low as 104 yesterday before rallying to 106.50 today in early trading, and falling yet again back to the all-important 105.50 level. The volatile conditions will probably continue throughout the day, as there might be lower trading volumes before the crucial FED meeting in the evening. The Yen still traded without any major economic release from Japan, as the furious swings were all caused by rumors and false headlines.

Our assessment: The cross traded around the prior swing low at 105.50 that might remain in focus today and in the coming days as stimulus hopes could still dominate the news flow.

USD/JPY in a volatile range on the Daily Chart, Created by FxGlobe MT4

USD/JPY in a volatile range on the Daily Chart, Created by FxGlobe MT4

AUD/USD (current price: 0.7487)

The Australian Dollar got back above the key 0.75 level on Tuesday as it was helped by the better than expected New Zealand Trade Balance number, which pointed to a resilient demand from China. The rally faltered later on, as oil and gold remained weak and as risk-on assets traded sideways before the FED. The Australian CPI came in at 0.4% today, in line with expectations, following last quarter’s deflationary print of -0.2% that was one of the main reasons of the May rate cut by the RBA.

Our assessment: AUD/USD is still well below its prior high at 0.7650 but the pair showed some strength so far this week after last week’s steep drop, which followed the dovish RBA statement.

AUDUSD trading around the 0.75 level on the Daily Chart, Created by FxGlobe MT4

AUD/USD trading around the 0.75 level on the Daily Chart, Created by FxGlobe MT4

EUR/GBP (current price: 0.8365)

The pair is still trading in a very narrow range before today’s crucial releases, as the Pound remains under pressure following last week’s weak Services PMI that might be the first early sign of the drop in activity following the Brexit vote. Today’s GDP number will be closely watched by traders, and a weak reading might trigger another leg higher towards the 0.85 level in the cross. The current flag consolidation pattern provides strong support at 0.83.

Our assessment: The pair is in a long-term uptrend, with resistance near 0.8625. marking the Brexit-top that could be in jeopardy today, as several key releases are scheduled for the session.

EUR/GBP trading without short-term direction on the Daily Chart, Created by FxGlobe MT4

EUR/GBP trading without short-term direction on the Daily Chart, Created by FxGlobe MT4

Gold (current price: $1318) and Silver (current price: $19.55)     

Precious metals are still in the middle of a correction as stocks and risk currencies are still favored by investors around the globe. Despite the ongoing weakness gold still holds above the $1300 level and silver recovered back above the $19.50 zone following a string of steep losses. The metals are now stuck in a narrow range before today’s crucial session, with all eyes on the $19.50 and the $20 levels in silver and the 1300 and 1350 levels in gold.

Our assessment: Precious metals are still in a long-term uptrend and silver is showing some relative strength lately, despite the USD rally that might mean that a new upswing is near.

Silver trading between strong support and resistance on the Daily Chart, Created by FxGlobe MT4

Silver trading between strong support and resistance on the Daily Chart, Created by FxGlobe MT4

Economic Releases

The week’s most important event will take place today in late trading as the FED announces its interest rate decision and releases its monetary statement during Wall Street hours. Investors expect no change in the benchmark interest rate, but a change in the rhetoric of the monetary statement might be enough for a huge move in the related pairs. The British GDP print is also among the most awaited releases this week, while U.S. Pending Home Sales and Durable Goods Orders will also come out in the afternoon.

Original Source: FXGlobe Daily Analysis

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