USD/JPY Down After Fed Minutes, Geopolitical Jitters

  • USDJPY
    (${instrument.percentChange}%)

Fed Minutes

The minutes from the Fed's January policy meeting, which were published on Wednesday, showed that participants were expecting "that it would soon be appropriate to raise the target range". [1]

They also judged that it would be appropriate to start the process of balance sheet reduction, after the first rate hike and that "financial conditions would likely warrant a faster pace of balance sheet runoff than during the period of balance sheet reduction from 2017 to 2019".

Overall, we did not learn much new and since the late-June meeting and the conversation has since them shifted from the timing and number of hikes, to their size. Following recent new CPI Inflation surge, market were pricing in a 50 basis point rise in March, but yesterday' s minutes cooled down those expectations.

CME's FedWatch Tool now projects a 25 basis point rise next month, with 63.4% probability. In December, the highest probability (31.9%) is assigned to rates being 1.5%-1.75%, not 1.75%-2%.[2]

Ukraine

Western countries and NATO have refuted Russia's announcement of partial troop withdrawals from the region near Ukraine, with a White House source telling ABC News that Russia has increased its presence along the Ukrainian border by as many as 7,000 troops in the last few days, with some arriving Wednesday. [3]

Today, the US Ambassador to the United Nation, warned that "The evidence on the ground is that Russia is moving toward an imminent invasion". [4]

USD/JPY – H4

Renewed Ukraine jitters and the cool-down in market pricing around the Fed hikes is harming the US Dollar, with the pair now probing the key 115.05-114.85 area, as we had warned in the last analysis. Daily close below this level and the EMA200 may lead to sustained weakness towards and below 114.14.

However, the Relative Strength Index points to oversold conditions and current levels have the ability to support the greenback. This could give the chance to reclaim mid-115.00s, but at this stage it does not inspire confidence for moves beyond 116.35.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 17 Feb 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220126.pdf

2

Retrieved 17 Feb 2022 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

3

Retrieved 17 Feb 2022 https://abcnews.go.com/Politics/live-updates/russia-ukraine/

4

Retrieved 02 Jul 2022 https://usun.usmission.gov/remarks-by-ambassador-linda-thomas-greenfield-during-a-telephonic-background-briefing-before-a-un-security-council-meeting-on-the-minsk-agreements/

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