Talking Points:
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- the U.S. Dollar has been volatile of recent, falling after last month’s FOMC statement and abysmal GDP report, and then strengthening after last week’s NFP release. This raises numerous questions on near-term direction of the U.S. Dollar.
- While the Fed may not be near actually raising rates in September, the simple fact that they aren’t as dovish as many other Central Banks could equate to USD strength on the back of the Federal Reserve being simply ‘less dovish’ than the much of the rest of the world. This could necessitate a stance of dovishness from the Fed moving forward, so as not to trigger a rush of capital into the U.S Dollar in anticipation of higher rates. This may be why USD rallies have been sold so quickly while bad data has brought on a continuous-deluge of lower prices.
- We looked at price action setups in EUR/USD, GBP/USD, USD/JPY and then USD/CAD in regards to the recent volatility around USD; and then we looked at the precept of playing a reversal of Yen-strength in front of the Bank of Japan’s next meeting in September.
- While Europe and the U.K. are in the midst of extremely-dovish monetary policy, Japan largely underwhelmed at their last meeting after stoking expectations for a ‘comprehensive, bold economic stimulus program’ coming this fall (from the words of Japanese PM Shinzo Abe). While the most recent meeting didn’t bring much by way of new information, the BoJ meets again in September, reports just 12-14 hours ahead of the next FOMC rate decision, and could be opportune time for the Bank of Japan to ramp up efforts. And even if they don’t the likely anticipation of such leading into this meeting could be enough to carry short-Yen positions should this theme begin to show prominence.
- If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking for an even shorter-term indicator, check out our recently-unveiled GSI indicator.
--- Written by James Stanley, Analyst for DailyFX.com
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