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Will today’s FOMC Minutes push the USD/JPY back above 109?

July 10, 2019 09:30

Source: Economic Events July 10, 2019 - Admiral Markets' Forex Calendar

Today, we want to focus on the FOMC Minutes which will be published later today and their potential impact on the USD/JPY.

In one of our last technical pieces on the USD/JPY our headline read: "USD/JPY positive on Mnuchin's trade deal comment – sell the bounce?"

That was shortly before the G20 summit in Osaka, and initially, the USD/JPY was again sold against the upper trendline. But the bearish momentum which was taken on wasn't strong enough to push the currency pair towards and below new yearly lows around 106.70.

Instead, the USD/JPY broke out of the downtrend channel and is now eyeing 109.00 again, mainly driven by a very solid NFP reading last Friday. The reason that is noteworthy is that, as a result, the probability of a 50bp rate cut from the Fed coming on the July 31 was completely priced out and drove 10-year US yields higher, and thus the USD/JPY.

With that in mind, today's FOMC Minutes will be carefully reviewed for any signs noting if a 50bp rate cut is still an option with a small probability, even after a strong job report.

If yes, the USD/JPY has a serious chance of another aggressive push lower, and 106.70 could be on the table again into the second half of the week.

If no, in our opinion there seems to be no reason not see the USD/JPY make it back above 109.00, even though we stay mid-term sceptical for the long-side in the currency pair.

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between April 20, 2018, to July 9, 2019). Accessed: July 9, 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 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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