US dollar and Treasuries yield fell after a less dovish FOMC as the market may be doubting Fed’s ability to accurately predict future outlook. Short USD/JPY?

  • Fed held rates unchanged as widely expected this morning and its policy statement showed that they might continue to hold throughout 2020.
  • Instead of rising as what the market expected, dollar index and Treasuries yield fell 0.3% and 5bps respectively.
  • This may be due to Fed’s credibility being challenged after Fed provided an upbeat outlook on the US economy in December 2018 but was proved wrong.
  • This led market to believe that Fed could be wrong this time around as well.
  • Having said that, the risk is still on the downside as trade tariffs implemented by the US on China, which will be announced on 15 December, is still uncertain.
  • We believe that USD/JPY may be pressured to move lower until trade tariffs are cleared.
  • USD/JPY is currently moving higher but if we see a rejection at the current price, we could see short sellers coming in to push price lower towards 108.20.

    Breaking News_20191212

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