Will Fed Determine Dollar?s Direction
Today’s Spotlight Market
The British Pound (GBP) has lived up to its name of late as the GBP has been ?pounded? lower vs. the U.S. Dollar on concerns of a ?yes? vote for an independent Scotland. However, the GBP has gained in value versus the Euro, which may be a sign that market participants anticipate that the Scottish independence vote will fall to defeat. The results of the vote should be known sometime today.?? ?
Fundamentals
The U.S. Dollar has been a hot topic among traders of late as its next move would be highly dependent on the signals the Federal Reserve sends following the September Federal Open Market Committee meeting that ended this past Wednesday. Well, the upshot from the Fed seems to be ?steady for the course? as the statement released following the 2-day meeting kept the key phrase that short-term rates would remain low for a ?considerable time?. While the Fed plans to keep short-term rates at very low levels for some time, it will also continue to wind down its bond buying purchases, with an eventual ending date possibly as early as October. 14 of 17 Fed officials believe that the first interest rate hike will occur in 2015, which is higher than the September forecast where only 12 members believed that the first rate hike would occur next year.? Following the meeting, the U.S. Dollar rose to 6-year highs versus the Japanese Yen, as well as new 14-month highs versus the Euro. While currencies have historically been known to establish multi-year trends once a major fundamental shift has occurred, it may be still too early to tell if the Fed?s eventual move towards raising the key benchmark will result in a bullish trend in the U.S. Dollar, especially against the Yen, where the Bank of Japan has no choice but to continue own quantitative easing policy to help weaken the value of the Yen to help break out of its multi-decade economic stagnation.??? ?
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for the Japanese Yen futures, we notice that the uptrend line drawn from the 1985 lows has been taken out to the downside. This could be a signal that the 30-year bull market for the Yen vs. the U.S. Dollar has ended. The market is now well below the 200-week moving average and the 14-week RSI has moved into oversold territory with a current reading of 25.65. If the Yen bull market has indeed ended, the next major support level is not seen until the 0.8160 price level, which is over 1100 pips lower than the current price. A weekly close above 1.0000 would put serious doubt to the change in trend, with a weekly close above 1.0660 needed for Yen bulls to regain the upper hand.
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