Interest Rate Decrease leads USD Not Being Bought

USDJPY Real Time Daily Chart

Last week on USDJPY

Last week on USDJPY, USD rebounded to 108.99 at one time, but it was pushed back again to the 107 yen level and returned to “the original sheath” without being put on the 109 yen level. The reason for the USD rebounded to 109 rate was because of the positive employee statistics and thats why USD was bought at a time, but it seems that it was not a move to buy further. FOMC will be held at the end of this month and most likely the interest rate will decrease, and I think the range will be between 107.00 – 109.00.

Interest Rate Decrease

Although the US economic indicators are somewhat bright in the housing sector, the overall economy is still fluctuating, and seems its not very strong, but not bad enough to lead to recession. Nevertheless, there is no doubt that the Fed’s monetary policy stance is dovish. It is clear from the stock market that all three major indices have hit a record high, bonds are solid and gold is being bought. Based on the assumption that interest rates will decline in the future, the dollar is being sold and the yen is being bought.

The focus is on the number of future rate cuts whether it is two times or three times or maybe four times. If it is three times, the line of September and December becomes thick following this month, in which case the USDJPY could go below the level of 105 yen.

On the other hand, after deciding on the interest rate decrease this month, if there will be only one more time, most likely USDJPY will not go down that much. It all depends on economic indicators to be announced in the future. Many FOMC members are positive about rate decrease, but some members, like the Chicago Fed governor and the Dallas Fed president Mr. Kaplan, are cautious about the decrease.

How many times of rate decrease will be executed is a key

Still, the Fed will continuously be looking for reasons to decrease the rate, so that means USD will not be bought so much. In addition, the pressure is expected to increase on political dates because maintaining a favorable economy is good material for both the Republican Party and the Democratic Party for the presidential election. Although there is no news that is particularly important this week, it is likely to be a search for news that read how many times the rate will decrease towards the FOMC at the end of the month.

Economic Calendar of the week (UTC)