Forex Top Team

Caution for yen appreciation and dollar depreciation due to FOMC today, shadows in the US labor market, and uncertainty in US regional banks

Today, the results of the US FOMC will finally be announced. In anticipation, the market is showing somewhat uneasy movements. Yesterday’s announced US JOLTS job openings fell below the 10 million mark for two consecutive months, which led to an expansion of dollar-selling reactions along with a decline in US bond yields. Although a 25bp rate hike is almost certain for today’s FOMC, the view of maintaining rates for the next meeting in June has become even stronger.

Furthermore, this week, events such as the bankruptcy resolution of First Republic Bank followed by its acquisition by JP Morgan occurred. Since the bankruptcy resolution came first and the acquisition followed, the market seems to be terrified about which regional bank will go bankrupt next. Along with the decline in US stocks, the yen appreciation that is pushing down USD/JPY and cross-yen pairs is also expanding.

USD/JPY is being sold in today’s Asian market, with the pair breaking below 136 yen at the moment. The momentum of yen-selling after last weekend’s Bank of Japan meeting has temporarily receded. Whether financial uncertainty centered on the United States and the trend of US stocks will stabilize seems to be the key point for the return of yen depreciation.

Economic indicators to be announced later in overseas markets include Turkey’s Consumer Price Index (April), Eurozone Unemployment Rate (March), US MBA Mortgage Applications Index (04/22 – 04/28), US ADP Employment (April), US Non-Manufacturing PMI Final (April), US ISM Non-Manufacturing Index (April), US Federal Reserve Policy Interest Rate (FOMC) (May), and Brazil Central Bank Policy Interest Rate (May). While waiting for the US FOMC, we would like to continue to pay attention to US employment indicators and economic indices, as we did yesterday.

In terms of speech events, the most anticipated is the press conference by Federal Reserve Chairman Powell after the FOMC meeting. It is expected to indicate whether the path for interest rate movements after June will be shown. The market is pricing in a nearly 90% chance of holding rates steady for the June meeting. Slightly more than 10% see rates on hold for May-June. The probability of an additional 25bp rate hike in June is less than 1%.

 

This week has been unexpectedly volatile, and I haven’t been able to ride the waves well yet, but I’d like to follow the flow after this FOMC. However, even if I follow it, I am considering entering only after the results are out and the flow has been established.

Besides the USD, I am considering buying CHFJPY. This is a separate plan from the FOMC, and if there is a chance, I will aim for an entry point.

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