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We’ve got potential action coming ahead for the Greenback with the latest FOMC monetary policy decision right around the corner. Will that bring on more bears to USD/JPY‘s current move lower?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/NZD ahead of U.K. economic updates, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 12821.08 -0.11%
FTSE: 6132.58 +0.05%
S&P 500: 3245.59 +0.84%
DJIA: 26461.04 +0.31%
US 10-YR: 0.584 % +0.003
Bund 10-YR: -0.498% +0.012
UK 10-YR: 0.122% +0.012
JPN 10-YR: 0.02% -0.005
Oil: 41.33 +0.71%
Gold: 1,949.20 +0.23%
Bitcoin: 11,159.21 +1.99%
Ethereum: 322.56 +1.53%

Fresh Market Headlines & Economic Data:

US Pending home sales continued to climb in June, rising 16.6% monthly since May, and rising 6.3% since June 2019

U.S. goods trade deficit narrows; global flow of goods improving

Trump says administration, Democrats far apart on coronavirus relief bill

German Import prices in June 2020: -5.1% on June 2019

ECB’s Stournaras Says Virus Bond-Plan Exit Depends on Inflation

UK mortgage approvals bounce back in June, Bank of England says

BoE’s Haldane sees mixed signals from regional visit

New French Europe minister – Brexit deal possible but not ‘at any price’

Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:

FOMC Interest Rate Decision at 6:00 pm GMT

FOMC Press Conference at 6:30 pm GMT

New Zealand Building Consents at 10:45 pm GMT

Japan Retail sales at 11:50 pm GMT

Australia Building Permits, Import/Export prices at 1:30 am GMT (July 30)

What to Watch: USD/JPY

USD/JPY 1-Hour Forex Chart
USD/JPY 1-Hour Forex Chart

On the one hour chart of USD/JPY, we can see that the Greenback has been selling off over the past week on broad USD weakness, but the momentum has slowed in today’s trade. That’s likely due to traders sitting back on the sidelines ahead of the this afternoon’s monetary policy statement from the Federal Reserve.

Expectations are that the FOMC will continue the rhetoric of doing what is necessary to support the economy but hold off on any changes to policy for now. The change to watch out for is any change in their economic outlook, which is a low probability scenario at the moment given the uncertainty that the COVID-19 has brought upon the markets. Traders will also be on the watch for any comments on yield-curve control and guidance on inflation rates and asset purchases.

If the above scenario of “no policy changes” plays out, its likely traders will stay bearish on the Greenback. But after a strong run lower over the past week, we could see a bounce on profit taking during / after the press conference.

If we do see a bounce, watch out for the 105.50 to 106.00 area for potential bearish reversal patterns. That’s likely the area swing and longer-term position traders may try to play the price trend lower. And ofcourse, a break below today’s lows (around 104.80) is also a pattern that could draw in momentum sellers if the Fed doesn’t surprise the markets at all.

For the bulls on USD/JPY, there’s really no argument out there for long position, other than profit taking. But if we see the very, very low probability scenario of the FOMC coming out bullish on the economy and/or upgrading its outlook on inflation, then the Greenback could strongly bounce on the news. A sustained break above 106.00 is the pattern to watch out for before considering a long position.