The USD/JPY about to fake-out above 109.00 driven by dovish FED officials?

October 18, 2019

By Admiral Markets

Source: Economic Events October 18, 2019 – Admiral Markets’ Forex Calendar

As we enter the weekly close, we want to take a look at the USD/JPY, especially with several Fed officials speaking today.

Over the last few days, we saw the latest Brexit developments and a truce in the trade conflict between the US and China result in an obvious risk-on market environment, pushing the USD/JPY into the region around 109.00 and given the recent price action further gains seem to have a higher likelihood than a sharper drop.

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Still, even if we get to see a short-term push above 109.00, we don’t necessarily consider such a push to be sustainable. Because after the Fed restarted their asset purchases to prevent a cash crunch in money markets and planning to buy US Treasuries for the next 8.5 months at a pace of 60 billion USD per month, any hints from Fed officials in today’s speeches that the Fed is to consider extending that program if no improvement in regards to the “liquidity issue” is seen, the US dollar could see a new wave of selling.

That said, if we fail to sustainably recapture 109.00, another attempt to break back below 106.80/107.00 stays a serious possibility, even though the USD/JPY stays technically neutral on a daily time-frame between 106.80/107.00 and 108.50/109.00:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between August 31, 2018, to October 17, 2019). Accessed: October 17, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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By Admiral Markets