USDJPY: Dollar Drops after “Dovish” FOMC Minutes

24 / 05 / 2018
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The greenback slid on Wednesday evening and continued to trade weaker on Thursday, with the USDJPY pair losing 0.50% during the London session, trading around 109.50.

The FOMC minutes showed that most Fed officials saw next rate hike likely appropriate soon, meaning the Fed will most likely hike rates again at its June meeting. Also, some officials saw forward guidance revision appropriate soon, meaning the Fed could hint at more rate hikes in the near future.

However, what was interpreted as dovish is the fact the FOMC noted inflation overshoot could be helpful, suggesting if inflation jumps further above the 2% goal, the Fed might not “panic” and the current path of rate hikes could be kept, despite higher inflation. The US dollar dropped after this news, while bonds and stocks were bid.

The pair dropped back below the 200 day moving average and therefore the short-term trend switched to bearish. The resistance is now seen at the 110 level and if broken again, further upside momentum can push the pair back to 111.

On the bearish side, the next strong support is seen around 109, where previous lows can be seen. The MACD indicator has sent the bearish signal on the daily chart and therefore further losses can occur. In all cases we strongly recommend to have rigorous money and risk management.

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