The US dollar did very little against the Japanese yen on Tuesday, as we wait for the results of the FOMC meeting. Quite frankly, this is not a huge surprise, but I do believe that eventually we go higher as we have filled a gap, and have bounced again. I think that at the end of the day tomorrow, it’s very likely that the market may go above the 111 level. Traders will be looking to see if there’s going to be more interest rate hikes later in the year, which they are starting to think won’t happen. I think they will be surprise, and the market should continue to go higher. It will be volatile of course, but longer-term I believe that we will look for the 114 handle.
Alternate scenario
If the Federal Reserve explicitly says that there are not going to be rate hikes going into the future, or least hence that it is going to be difficult, there’s likely to be serious negative pressure in this market. If that happens, I would look for a move to the 108 level almost immediately. If that level breaks down, then we should go much lower, perhaps as low as the 102 level. Either way, we are about to see a pretty significant move in what is atypically volatile market. With this being so volatile, I would urge caution, but I do have a longer-term upward bias, which could be solidified at the end of the trading session today. I would not look for a lot of volatility between now and 2 PM Eastern Standard Time.
Written by FX Empire