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Chart of the Day: USDJPY

The June FOMC meeting happening in a few hours (4 am AEST, on 20 June) is arguably one of the most anticipated central-bank meetings for some time. For that reason, USDJPY is my Chart of the Day.

Chart of the Day - June 19, 2019 - USDJPY

It’s perhaps the cleanest FX pair to understand the reaction to what’s said or not said. The setup on the daily chart shows traders have no conviction to act, and this could be resolved tonight.

The meeting is important not because traders genuinely feel they’ll cut rates. It seems highly unlikely, and the market puts the probability of a cut tonight at 20%. When we look at the interest rate markets and what traders are discounting, however, we can see the implied probability of a July cut sits up at 82%, with over two cuts priced in for the full calendar year.

I’ll cover this event in more depth in my Daily Fix report (subscribe here). But the FOMC statement and Fed Governor Jerome Powell’s press conference need to give the market belief that a rate cut in July is on the cards or the USD will rally.

As we see, price is consolidating in a 108.80 to 107.80 range, and a break here could set a new trend. We can see traders have used the 20-day moving average as their level to fade rallies since late April, so that could be a level to watch, and a break above here could take us into 109.00.

The higher-probability trade is to counter moves into the Bollinger bands. But, given the distance to the top Bollinger band, I’m sceptical that it gets there and would be fading moves into 109.15/20 on the day.

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