Starting from FOMC, a dollar-selling strategy! ~Dollar-selling strategy for December 20~

◎ Dollar Selling Strategy

・When a rate hike is announced at the FOMC, the dollar tends to strengthen

・Enter dollar selling after market calms

USD/JPY 1-hour chart

USD/JPY 4-hour chart

USD/JPY daily chart

◎ Past Movements at FOMC

September FOMC release USD/JPY 1-minute chart

June FOMC release USD/JPY 1-minute chart

◎ Outlook and Points of Attention

Firstly, although unlikely, if December FOMC results in holding rates, I would want to sell dollars aggressively.

However, concerns like this show that the market has become less priced-in for this FOMC. At the same time, attention is increasing.

In the previous two announcements, immediately after the release there was dollar buying, but from the moment the press conference began, the dollar turned to selling. This time, there is a possibility of dollar selling. The focal points are the “dot plot” and the “neutral rate.”

If a rate hike is implemented, the FF rate would be 2.5%. Has the future rate implied by the dot plot been revised downward!? At the time of the September FOMC release, the 2019 rate forecast was 3.0%–3.25%. In terms of the number of rate hikes, it implied 2–3 hikes. There is a focus on whether this dot plot would be revised downward this time. If it turns out to be 2.75%–3.0%, then the 2019 number of rate hikes would be 1–2, which would imply dollar selling.

Additionally, what makes this FOMC notable is the remarks by Fed Chair Powell regarding the neutral rate. What will he say about the neutral rate at the press conference? If the current FF rate is near the neutral rate, and approaching it implies that the cycle of rate hikes is nearing its end, that would likely lead to dollar selling.

The dot plot and the neutral rate are summarized below. If you like, please read for reference.

What are the dot plot and the neutral rate?