- The US dollar initially rallied a bit during the early part of Tuesday but has given back those gains to show signs of weakness.
- Weakness is probably a strong word here. I really would suggest that it's probably more or less a little bit of profit taking heading into the FOMC meeting.
After all, we have bounced about four handles along the way, but now traders will be focusing on whatever it is that Jerome Powell has to say when it comes time to the press conference, the decision itself, coming out of the United States should be a 25 basis point cut, but where we're going from there is the big question.
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Fed Fund futures markets now have an 80% chance of the Federal Reserve sitting still in January, meaning that this will still continue to be a significant carry trade pair. However, we also have the Bank of Japan early on Thursday, and they'll have something to say about this as well. I think because of this, it's probably best to leave this pair alone in the short term, but I do like the idea of buying the dip. I'll be watching closer to the 50-day EMA near the 152 yen level.
Ultimately this is a market that has been somewhat lively as of late and I think we are either going to try to find some type of range, maybe between 150 yen on the bottom and 155 yen on the top, or perhaps this is a pullback before a move higher. I suspect it's probably the latter of the two as the US dollar, although a little overbought against quite a few currencies out there, is probably in the middle of swallowing just about everything. Next day or two though could be a bit difficult.
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