Dollar-Yen Buy-on-Dips Strategy! ~Dollar Buying Strategy on November 29~
◎ Strategy and Position
Dollar-buying Strategy
Entry timing: 112.90 yen to 113.00 yen
Profit target: 114.00 yen
Stop: 112.60 yen
USD/JPY Timeframe Chart
As mentioned in previous articles, there is expected to be real demand for dollars toward year-end. Therefore, there is a strong tendency not to see much dollar selling at year-end. Unless a very strong dollar-selling factor appears...
Currently, there isn't a strong dollar-selling factor. However, sentiment is being influenced by statements and outlooks about next year's rate hikes.
Dollar-Yen Buy Strategy! ~ Bold Forecast for USD/JPY by Year-End ~
Today, many regional Fed presidents are scheduled to speak. Some speaking from presidents with voting rights are also scheduled.
Pay attention to statements from key figures, especially those who will have voting rights next year.
Key points are summarized below.
Previously, the dollar-yen rose on Clarida's remarks, but plummeted yesterday on Powell's remarks.
The focal point is the “neutral rate.”
The neutral rate is neither cooling nor overheating the economy; it is a comfortable rate that is not too high or too low.
Regarding the neutral rate, Chairman Powell said in October that we are far from it. Being far from it implies more rate hikes are needed, leading to the interpretation that hikes may continue next year.
However, in less than two months, yesterday he said “Rates slightly below the neutral range” which suggests we are approaching the neutral rate. This implies that hikes may end soon.
Ending rate hikes... For companies heavily burdened by interest, this is bullish. Stock prices have risen. However, in the currency market it leads to dollar selling.
Clarida, a former dove, was expected to speak in a dovish manner, but the current stance says “Support for gradual rate hikes” and the degree of dovishness was weaker than anticipated. This contributed to dollar buying.
In the FOMC, policy rates are determined by vote. Hence, attention is on other Federal Reserve officials and regional presidents with voting rights next year.
The current policy rate is 2.25%; December rate hikes are largely priced in, bringing it to 2.50%.
Many see the neutral rate around 3.0%, so two more hikes (0.25%×2 = 0.50%) would bring us to the neutral rate.
Will next year have 3 rate hikes? 2? 1? The market is watching.
Reference: Reuters article.
https://reut.rs/2AyVDUQ
◎ 2019 Year: Regional Federal Reserve Bank Voting Rights
“William’s – President of Federal Reserve Bank of New York”
“Rosengren – President of Federal Reserve Bank of Boston”
“Evans – President of Federal Reserve Bank of Chicago”
“Browd – President of Federal Reserve Bank of St. Louis”
“George – President of Federal Reserve Bank of Kansas City”
◎ Recent Voting-Right Officials’ Remarks
11/15
Powell – Chair of the Federal Reserve Board
“Very satisfied with the state of the economy”
“There are solid reasons the economy will continue to move positively”
“While the business community has expressed concerns, the impact of the trade dispute is not yet visible”
“The Fed must not overlook the risks of both sides getting overheated. We must avoid delaying the recovery or letting inflation get out of control”
“Normalizing the balance sheet is proceeding very smoothly, but the appropriate end timing is still unclear”
“The economy benefits from trade; trade should be free and fair”
“All FOMCs of the Fed will be live going forward”
“Debt is not a new problem but a medium- to long-term issue”
“Debt is not something the Fed can control”
“The stock market is a concern, but the focus is on the real economy”
“Wage growth is within a range that reflects inflation and productivity”
11/16
Clarida, Deputy Chair of the Fed
“The move toward normalization by the Fed is not too fast nor too slow”
“Rates are approaching the neutral level”
“Future policy depends on economic data”
“There is a slowing trend in global economic growth”
Evans, President of the Chicago Fed
“The economy is strong”
“This year’s GDP growth outlook is around 3.25%. It is above the trend”
“Considering the economic outlook, it is reasonable for the policy rate to rise to3.25%”
“Inflation could rise to 2.5% without surprise”
“Some worry about the global slowdown, but it is unclear whether that will be reflected in the economic data”
“The next six months of economic indicators will be very important”
11/27
Evans, President of the Chicago Fed
“The time to set policy stance to neutral”“US economic data show the economy’s strength”
“US economic data show the economy’s strength”
Clarida, Deputy Chair of the Fed
“The US economy is robust. The labor market is healthy”
“Support gradual rate hikes”
“Neutral rates are unclear”
“If inflation rises above the target, policy will be adjusted”
11/28
Powell, Chair of the Federal Reserve
“There is no predetermined path for policy”
“Rates slightly below the neutral range”
“The impact of rate hikes is uncertain and may take more than a year to manifest”
“Policy rates are still below historical standards”
