Don't let the technical analysis blind you. One person's descending triangle is another's head and shoulders is another's pennant, is another's cup and handle...you get the idea. You give me a chart and tell me to show why it is bullish or why it is bearish, using technical analysis, I could show you both sides. Between now and 2:15 ET, there is no telling how the USDJPY will trade. I expect it will trade mostly sideways in a pretty tight range. After 2:15 depends on the Fed's decision. But I think regardless of the decision, the bias on the USDJPY will be bearish for three reasons:
1) Market has 100% priced in a 25 basis cut and has 40% priced in a 50 basis point cut. Anything short of 50 will be a massive sell off on the market. We have run up over 700 points in the DOW over the last two weeks, ever since Fed Chairman Donald Kohn hinted that the Fed would consider lowering rates. A market sell off will cause people to pare back on their yen carry trades causing the USD to fall and the JPY to rise.
2) If the Fed does cut 50 basis points (keep in mind, two weeks ago, they were preaching that further cuts were unnecessary), that is a huge devaluation on the dollar. The market will trade positively on that news for the rest of the day, but I would still expect to see some profit taking on the last two week run.
3) Finally, the USD JPY has run from the 107.5 range to the 111.8 range over the last two weeks. The fundamentals say this pair is going lower. The technicals say this is a great entry point for shorting the USDJPY.
1) Market has 100% priced in a 25 basis cut and has 40% priced in a 50 basis point cut. Anything short of 50 will be a massive sell off on the market. We have run up over 700 points in the DOW over the last two weeks, ever since Fed Chairman Donald Kohn hinted that the Fed would consider lowering rates. A market sell off will cause people to pare back on their yen carry trades causing the USD to fall and the JPY to rise.
2) If the Fed does cut 50 basis points (keep in mind, two weeks ago, they were preaching that further cuts were unnecessary), that is a huge devaluation on the dollar. The market will trade positively on that news for the rest of the day, but I would still expect to see some profit taking on the last two week run.
3) Finally, the USD JPY has run from the 107.5 range to the 111.8 range over the last two weeks. The fundamentals say this pair is going lower. The technicals say this is a great entry point for shorting the USDJPY.
