The week has barely begun, and already in the early morning it provided us with excitement – I mean the rapid strengthening of the yen. Despite a day off from work in Japan, volatility on the yen was extremely intense. The first downward impulse, which appeared on Monday 6 a.m., strengthened the yen by 440p to the U.S. dollar, the USDJPY rate fell from 159.60 to 155.20. A two-hour upward correction was followed by a second downward impulse and the rate reached 154.50. Currently, an upward correction is underway and the price is just below 156.00.
Undoubtedly, there was an intervention by the BoJ, although so far there has been no official confirmation that it was the BoJ that caused these sharp movements on the yen pairs. Today, however, there was a BoJ announcement that the BoJ did not intervene in the currency markets between March 28 and April 25. The next BoJ financial operations report will be released on May 30.
What else awaits us on the economic calendar?
Wednesday – The FOMC – the Federal Open Market Committee, responsible for shaping monetary policy including, among other things, oversight of open market operations and the US money supply – has been meeting since Tuesday. Tomorrow at 7pm GMT+1, we will learn the Fed’s decision on interest rates in the coming weeks.
The market expects rates to be left unchanged.
The FOMC is expected to keep interest rates at 5.25-5.50% at its May meeting. Good economic and labor market data with reluctant inflation and slowing GDP growth are likely to result in a disapproval of a hike, but neither is the mood for interest rate cuts.
The latest meeting minutes confirm that almost all participants assessed that it would be appropriate to move to a less restrictive policy at some point this year but don’t expect it earlier than Q3. As a result, investors will be paying attention to how Chairman Powell will analyze the latest inflation data, which we may learn about in a press conference starting at 7:30 pm GMT+1.
Also on Wednesday, ADP data will be released at 1:15 pm. The ADP national employment report is a measure of monthly changes in private non-farm employment, based on data from about 400,000 US business customers ( that’s about 24 million workers). The publication, two days before the government data, serves as a preview of the government’s Labor Market Report. A reading that is stronger than forecast is generally favorable (bullish) for the USD, while one that is weaker than forecast is generally negative (bearish) for the USD.
About 180,000 new jobs are expected, which is close to the March data.
It should also be noted that this information will be released on May 1 when it is a public holiday in many European countries… which could significantly reduce liquidity in the currency markets.
Nonfarm Payrolls on Friday
Friday may also prove to be more volatile than usual due to labor market data at 2:30 pm -NFP- non farm payrolls. This is significant data for the Fed in making monetary policy decisions. New non-farm jobs are expected to fall to 243,000 from March, which added 303,000. I should add that this Friday is a day off in Japan…could this be an opportunity for another intervention on the yen?
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The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE . I will talk more about the PA+MACD strategy applied to these currency pairs during the live trading sessions, which you can attend from Monday to Friday.
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