This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
After having gone through a fairly long period of outperformance, the rally in the greenback seems to have somewhat stalled – uncertainty and caution will become the dominant theme around the Fed meeting. Following recent concerns about global growth, some investors feel calls for the Fed to delay an end to the asset purchase program are warranted.
However, I feel this is unlikely, given the $15 billion left is merely a token amount and won’t make a major difference. On the other hand, some analysts have commented, saying that, if the ‘considerable time’ reference is removed, USD would be supported.
Buying pullbacks in USD/JPY
The pair I will be watching closely is USD/JPY as there is also plenty of data to look out for on the Japan end. Yen weakness was attributed to reports the BoJ sees a high possibility of inflation falling short. This puts Japan’s inflation readings at the end of the week in focus.
We also have the BoJ meeting on the same day, with some are speculating we could finally hear something different from the recent rhetoric we’ve grown accustomed to. USD/JPY has dropped back below ¥108 early in Asia and I am in favour of buying the dips this week. The 50% retracement of the October drop and the 50-day moving average come in around ¥107.64 – I feel there could be buying opportunities in that region.