QE came to an end as many expected and the Fed offered up a moderately hawkish statement. The Fed did not make reference to global growth concerns as the market was broadly expecting, sounding more optimistic about the labour market and showing less concern about moderating inflation. However, the ‘considerable time’ reference was maintained, but analysts feel this will go in December when the Fed also releases updated projections. As far as the rate hike is concerned, the market is now firmly in the Q2 2015 camp.
USD/JPY extends gains in Asia
With this in mind, yield firmed up and US dollar strength resumed after a period of consolidation. USD/JPY is the pair I’ve been watching closely this week and it has finally started to make a move with only a couple of days’ trading left in the week.
Yesterday I looked at positions on a break above ¥108.35, last week’s highs. This would have been triggered and the pair has since traded through ¥109.00 in Asia. There is still the BoJ meeting to go and that also has potential to move the pair significantly. Further yen weakness could see the pair retest early October highs above ¥110.00.