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The Fed to Wind Down Stimulus While BOJ Does the Opposite – A USDJPY Rebound (American Session)
Written by: Penton, Amber
|Currency Pair:||USDJPY||Volatility:||300||Stop Loss:||94.393|
|Recommendation:||BUY||Entry Point:||95.393||Take Profit:||97.393|
US markets rebounded on Monday as investors were positive the Fed will provide a clearer statement on winding down its QE3 stimulus program. Dow Jones Industrial Index gained 109.67 points closing at 15179.8 while the S&P finished with 1693.04, a 12.31 point improvement. A long position is well advised for this currency pair, on continued positive outlook for the US economy and the BOJ’s stimulus back in the picture.
As pointed by Lee Hardman, currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, the main driver for the currency move are talks about the QE “…the Fed may signal that it will soon begin to taper QE with both the U.S. economy and labor market improving,” he said.
Recent US economic data has supported the decision, with the Empire State Manufacturing Index showing significant improving conditions and beating expectations (7.8 vs 0.4) for the month of June. Later today, economic data for the US Building Permits, Core CPI and Housing Starts are to be released, and are anticipated to continuously grow versus prior months.
Japanese yen, on the other hand, is weakening on talks of further BOJ stimulus. Paul Lambert, Head of Currency at the asset management arm of BNY-Mellon mentioned, “Do not fight the Bank of Japan, ever. If anyone thinks the Bank of Japan will let the yen go anywhere it does not want it to go, they will be very wrong.”
A confirmation of the tapering on Thursday will send the markets higher, which will ascend the USDJPY up to higher levels. Hence, a long position is therefore advised.
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