All trading involves risk. Ensure you understand those risks before trading.
All trading involves risk. Ensure you understand those risks before trading.

Two trades to watch: USD/JPY, FTSE

Article By: ,  Senior Market Analyst

USD/JPY rises ahead of the Fed minutes, PMIs

The minutes are from the November Fed meeting where the US central bank hiked rates by 75 basis points. The statement had a dovish tilt to it, highlighting the lag time between the rate hike and the impact being realised in the real economy.

However, Fed Chair Powell pushed back against the idea of a dovish pivot. He said that the terminal rate would likely be higher.

Since the meeting, inflation data has cooled, and some Fed speakers have said that they consider the time is approaching for a downshift in the pace of rate hikes. The minutes should shed light on where policy members are.

Any sense of a less hawkish stance could pull the USD lower.

US PMI data will also be in focus and is expected to slow to 47.7 in October, down from 48.2 in September. The level 50 separates expansion from contraction.

Where next for the USD/JPY?

USD/JPY has rebounded off the November low of 137.67, pushing back above the 140.00 psychological level and the 100 sma. The pair hit resistance at 142.25, the weekly high. The RSI is below 50, suggesting the sellers could have momentum on their side.

Sellers will look to break below the 100 sma at 141.85 to expose 140.00 and open the door to 137.67. A break below this level creates a lower low.

Should buyers successfully defend the 100 sma, bulls could look for a move over 142.25, the weekly high, to expose the 50 sma at 145.00.

 

FTSE heads higher with PMI data due

The FTSE is heading cautiously higher, adding to solid gains from the previous session, as investors look past rising COVID cases in China and ahead of the Fed minutes later in the day.

Optimism that the Fed could slow the pace of rate hikes helped Wall Street end the day higher, and that optimism is translating over to a higher open in Europe.

Attention will be on the UK PMI data, which is expected to show further contraction. The UK composite PMI, often considered a good gauge for business activity, is likely to fall to 47.5, down from 48.2. The service sector, the dominant sector in the UK, is expected to contract further to 48 from 48.8.

The data is as good as confirming that the UK economy is contracting. The data comes after the OECD warned that the UK economy will contract by 0.4% in 2023 before rising just 0.2% in 2024.

Where next for the FTSE?

The FTSE has formed a series of higher highs and higher lows since mid-October. The price has risen above the 50 & 200 sma and has pushed over resistance at 7420. This, combined with the RSI above 50, keeps buyers hopeful of further upside.

Buyers will look for a move over 7485, the September high, to extend gains towards 7580, the August high.

Sellers could look for a move below 7420 to expose the 200 sma at 7320 and the multi-month rising trendline support at 7270.

 

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

© City Index 2024