Two day FOMC meeting has been scheduled to end tomorrow with possible rate hike announcement. Under such circumstances it is not wise to bat against JPY. Especially USD/JPY which exhibits high correlation with US bond rates. Our long USD/JPY is off the good start with sudden jump of 20 pips while we are writing this.
What is the expectation from the trade?
Well, not much ! While it seems like USD/JPY is headed lower towards 105, we are just playing a tactical trade here, taking advantage of unwillingness of traders to engage and push it towards any extremes before Fed meeting outcome. Our initial target is 110.50 and then anything more than that upto 111 will be a bonus.
Don’t get married with the position and get out during the bounce higher. Because right now it is just a counter trend trade taking the advantage of the situation.
Besides, our short USD/CAD trade is going wonderfully well 🙂
UPDATE ( 6/16/2017 – 10:30 AM IST ) :
Thanks to the weak CPI numbers ( Is 1.9 instead of 2.0 expected really weak? ! But anyway traders are always on their on to make sense of things the way it fits their style) we got a chance to buy ahead of FOMC close to 109.
So now should we get greedy and stick to the position?
Looks like 111.50 is in the cards but we are closing it and will be looking for buying while it pulls back toward 110.50. But as always, it’s data dependent ! 😉
PS – Sticking to the a simple mantra of buying the currency where CB is hiking and selling where it’s cutting has very high probability of winning trades. Simple ! It doesn’t have to be complex 🙂
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