Dollar Pulls Back on Dovish Minutes, BoJ Standstill Dollar-yen bulls may be forced to take pause after central bank decisions, from each respective currency, give traders something to chew on:
The FOMC minutes yesterday were nothing short of redundant. I am beginning to think it is the same speech month-after-month, but financial outlets took whatever they could to spin it as hawkish as possible.
That should have been good news for the dollar, but if one were to actually take the minutes in context then one would see that the Fed is still on the fence. The camp still remains divided, and some official suggest a December rate hike “may” be appropriate with a mere four weeks till the next meeting.
The backdoor of data-dependency still remains, so if the Fed does not want to hike in December then they have a myriad of recessionary and deflationary data to choose from.
I proposed a simple question on social media: “If traders really thought a Fed hike is in play, why's the dollar down, stocks up? Wasn't that way after October FOMC.” After the October minutes were interpreted to be hawkish, the dollar began to rally extremely hard and stocks sold off. But, I digress.
Across the Pacific, in a faraway land where debt-to-GDP is approaching 300 percent, Japan’s policy minutes showed that the Bank of Japan (BoJ) has decided to not undergo more QE. This was largely expected but still affected USDJPY.
Economists were sad to learn this, following Japan’s fifth recession since 2009. Prime Minister Shinzo Abe’s “three arrows” economic plan is looking like a metaphorical representation for the three recessions under his watch.
BoJ Governor Haruhiko Kuroda did some lip service following the minutes saying the economy was on a “gradual recovery path.” Uh…
Technically, price action is approaching 123, and the momentum is moderate. The +/- DMI is suggesting that if USDJPY continues to trend lower, negative bias on price action would be asserted with a bearish divergence.
Minor trend support will be strengthened with the 50-4H EMA, which is located roughly 122.90. If price action closes below trend support, near-term support is seen at 122.23. However, if the dollar can regain its momentum, 123.70 will be tested. This level also resembles ascending triangle resistance, and a breakout close above this could cause further upside momentum.
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