Next Week News

Goldman Sachs made some forecast concerning USD related to the FOMC meeting which will be held next week on Thursday:

1. "With an all-important FOMC meeting coming up next week, focus on the USD factor may increase once again. That has not typically been helpful for EM FX in recent years. But given our US Economics team’s view that the first hike is not likely to come until December and given the very sharp sell-off in EM FX in recent days, some stabilisation is certainly possible in the event of a dovish outcome."
2. "This would argue for some near-term caution in chasing the rapid moves of recent days. However, such a reprieve is likely to prove temporary, in our view, because the underlying external and internal adjustments are not complete, and we continue to see room for EM FX weakness versus the USD to extend in the medium term."

Just to remind about next week's FOMC metting:
2015-09-17 19:00 GMT (or 21:00 MQ MT5 time) | [USD - FOMC Statement, Federal Funds Rate]

• past data is 0.25%
• forecast data is 0.50% or 0.25%
• actual data is n/a according to the latest press release

if actual > forecast (or previous data) = good for currency (for USD in our case)
if hawkish > expected = (for USD in our case)

[USD - FOMC Statement] = It's the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.

[USD - Federal Funds Rate] = Interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight. Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future.




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The dovish FOMC was on Thursday at 19:00 GMT so the major banks are made a forecast about the USD after FOMC.

Morgan Stanley: "Long USD positioning is vulnerable over coming days and perhaps weeks...But USD Impact Temporary. Our structurally bullish USD view has never been Fed-focused. Rather, our framework is built on the reduced investment attractiveness in much of the rest of the world. Any setback in the USD is likely to be short-lived in our view, providing a renewed buying opportunity against EM and commodity-related currencies."

BofA Merill: "The lowering of the median dots raises risks around a hike this year. But, the FOMC’s confidence in the outlook (particularly in the labor market) underpins hikes later this year, and therefore, the policy divergence theme we expect to support the USD. With a 30% chance priced into the meeting, we would expect some near-term pressure on the USD—particularly versus commodity-linked currencies where USD positioning is largest—as the timing of the first hike is now less certain. However, with any significant USD weakness likely to incent other central banks (like the ECB) to ease further and given our view for a December Fed hike, we see USD downside as limited here."

Nomura: "For the FX market specifically, Nomura doesn't think the information received today will lead to a sustained unwinding of USD longs versus G10 currencies—i.e., momentum could fade within a few sessions. We have been flat in terms of USD exposure versus majors for the last several weeks in anticipation of this outcome. But looking ahead, the Fed is still operating with liftoff this year as the central case, as the 2015 dots clearly signal. Bottom line: We still believe that our 1.10 year-end target for EURUSD is likely to be achieved under the assumption th that the Fed is able to raise rates by the December meeting, which seems fairly likely."

SocGen: "The Fed’s decision to leave rates on hold was not a surprise to a market positioned that way but the tone of the statement and the new lowered ‘dot-path’ (median sees one hike this year, 4 in 2016, 5 in 2017 and 3 in 2018 for a 3.375% Funds rate peak) have dragged Treasury yields down. That is not dollar-supportive. However, any bounce in risk assets will be short-lived. A dovish and dithering Fed inspires little confidence. Once EMinspired reduction in dollar long positions is over, we look for AUD, NZD and CAD to weaken again, with NZD the most vulnerable. And the biggest winner could still be the yen if the risk mood sours."

Danske: "We target EUR/USD at 1.10 in 3M and 6M and then up to 1.15 in 12M. We forecast JPY to underperform among the G4 as rising expectations for additional BoJ easing will support USD/JPY going into the 30 October Bank of Japan meeting. Moreover, we note that the upside potential in USD/JPY has increased following the past week’s substantial reduction in specualtive short JPY positions. We target USD/JPY at 124 and 125 in 3M and 6M, respectively. In contrast to EUR and JPY, GBP is also expected to perform on a 3M to 6M horizon supported by higher Uk interest rates as we still project Bank of England to hike in February. In the very short term, however, GBP is likely to come under pressure on low inflation prints in the UK as due to BoE’s explicit concerns about the weak short term inflation outlook. We forecast GBP/USD at 1.53 in 3M."


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Global growth remains 'moderate and uneven' amid the modest pick-up in advanced economies and the slowdown in emerging markets, and the more pronounced downside risks call for policy action to boost economic expansion, the International Monetary Fund said, as it cut its world growth forecasts for this year and next.

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European Central Bank policymakers considered boosting its monetary stimulus in October as it was suggested that the deflation risk remained relevant despite the ongoing slow recovery in the euro area, the minutes of the policy session revealed Thursday. The minutes also reiterated that policymakers are set to review the stimulus measures at the December 3 policy session.

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The leading index for India, which measures the future economic activity, increased in October, figures from the Conference Board showed Monday.

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With exports falling at a faster rate than imports, the Commerce Department released a report on Friday showing that the U.S. trade deficit unexpectedly widened in the month of October. The Commerce Department said the trade deficit climbed to $43.9 billion in October.

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The Federal Reserve Explained In 7 Minutes

Chair Janet Yellen grabbed everyone’s attention this year when she implied that the Federal Reserve, aka the Fed, may raise interest rates for the first time in six years. The markets have been responding ever since, once again proving that the Fed holds a lot of the cards when it comes to the U.S. economy.

But what exactly is the Fed? And how did it become so powerful?

Then there’s monetary policy, and that’s where the Fed comes in.

The Fed, while a government agency, is independent and operates without needing the approval of the branches of government. It was created in 1913 with the Federal Reserve Act as a way to centralize and regulate banking to avoid economic collapse. Now, as the nation’s central bank, the Fed supervises other banks to ensure they’re safe places for people to keep their money.

The Fed also studies economic trends and makes decisions intended to keep the economy healthy and employment levels high. It regulates interest rates and money availability. For example, if the Fed wants to hit the economic accelerator, the central bank will buy bonds from banks, increasing the money supply and spurring more lending to consumers and businesses.

In an economy with little growth, the Fed tries to encourage spending and hiring, so it will also lower interest rates. This means lower interest rates for the banks, which in turn means lower interest rates for customers when it comes to loans, mortgage rates, and more. When the economy’s in good shape but at risk of running too hot — meaning there’s too much inflation — the Fed does the opposite and increases the interest rates to steady things.

European Central Bank President Mario Draghi said inflation is expected to return to target without undue delay.

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The Federal Reserve has decided to raise interest rates by 0.25%. Here's what the move means for your student loans, mortgages, credit cards, and all other facets of your wallet.

Bankrate’s McBride noted that adjustable-rate mortgages only adjust once per year — so it’s not as if you will see your payments fluctuating on a monthly basis. However, this means that “the Fed could raise rates two or three times becore your rate adjusts. Then you’re looking at a significant rate increase,” McBride said. In his view, folks who have an adjustable-rate mortgage would be best served by locking in a low fixed rate while they still can — i.e, before the Fed makes further changes to interest rates.

“That’s the urgency now,” he said. “That adjustable rate mortgage at 3%, which could easily be at 5% in a couple of years, you could trade that away for a fixed-rate mortgage at 4%.”

Credit cards. If your credit card agreement says something to the effect of “APRs will vary with the market based on the Prime Rate,” you will likely see your rate go up by 0.25%.

Savings accounts. McBride has some bad news for every consumer who is hoping the rate increase will bring a commensurate increase to the interest rates applied to savings accounts.

“We are not going to see an improvement right off the bat,” he said. “A lot of banks are sitting on a pile of deposits, and their margins have really been squeezed by low rates. So the incentives for banks is to pass on higher rates on loans but not deposits so they can breathe some life into that margin.”

Mortgages. The rules for mortgages are roughly the same as those for student loans: if you have a fixed rate mortgage, you needn’t worry. If you have yet to take out a mortgage but plan to do so in the future, you will receive a slightly higher rate than you would have if you had locked in your rate during 2015 (or 2014, or 2013… you get the point). And if you have an adjustable-rate mortgage, you will see your rate go up.

Student loans. If you have a fixed-rate student loan — which you do if you borrowed from the federal government after July 1, 2006, or locked in a fixed-rate private student loan — Wednesday’s decision means nothing to you. Your rate will stay the same.

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USDJPY to rise towards our end-2016 target of 134 - BNP Paribas

• "The Bank of Japan maintained its annual monetary base expansion target of JPY 80trn, but outlined some changes to the composition of purchases."
• "The BoJ extended the average maturities of JGBs it buys to 7-12 years (from 7-10 currently), announced JPY 300bn of additional ETF purchases and increased the maximum amount of each REIT issue it can buy to 10% from 5% currently."
• "These operational changes to the purchases do not directly have particularly pronounced FX implication, but nonetheless they act as a reminder of the BoJs clear easing bias. USDJPY initially rallied on the announcement, but has since come off temporarily trading below 122, in sympathy with a pullback in the Nikkei."
• "In our view the BoJ do not need to increase their monetary base expansion target or cut rates further for USDJPY to rise towards our end-2016 target of 134. We think the combination of rising US front-end yields, continued JPY portfolio outflows and FX positioning should provide a backdrop against which USDJPY can rise."

As we see from the chart above - the weekly price is on bullish market condition located to be above 100 period SMA and 200 period SMA with the ranging within the following key reversal support/resistance levels:

• 125.85 resistance level located far above 100 SMA/200 SMA in the primary bullish area of the chart, and
• 116.13 support level located near the border between the primary bearish and the primary bullish area.

If W1 price will break 125.85 resistance level so the primary bullish trend will be continuing.
If W1 price will break 116.13 support level so the reversal to the primary bearish market condition will be started with the secondary ranging (the price will be 100 SMA/200 SMA in this case).
If not so the price will be ranging within the levels.

• Recommendation for long: watch close W1 price to break 125.85 for possible buy trade
• Recommendation to go short: watch W1 price to break 116.13 support level for possible sell trade
• Trading Summary: ranging bullish

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