Morning Preview: Top Trades for Thursday

Just when we think the USD has found some strength, the FOMC comes out and gives the US currency a bit of a whack!

Overnight minutes from the FOMC were released and the crux of it is that the Fed is suggesting that it might take longer than anticipated to reach their inflation targets. That’s bearish for the USD, as it means that the Fed will be unable to raise interest rates in the short term. Interest rates levels are incredibly important for FX traders because it’s the relative level of rates that lead to money flowing into the different currencies.

As Asian traders wake up and start to digest the news, we have to start making a plan for how to deal with the overnight developments. For now we have to put our short term downside targets on hold in the AUD and NZD and assume that there might be some upside momentum that carries over thanks to a weak USD.

In Australia today, there is employment data scheduled for release, so I think we will have to wait and see on that before we can think about any positions.

USD/JPY – FOMC Momentum

As we move towards an open in Asian equities, the best course of action will be to look for continued downside momentum in the USD/JPY.

Trade Idea

In going with the momentum, the obvious level that we want to try and test is 110.00. We have the potential to break that and move through it toward 109.50.

Economic Data to Watch

Today we have trade balance and export data to be released as equity markets open. This is always important data out of Japan, because they are an export economy. Positive data will strengthen the Yen as it means exports (and their economy)  are strong. That will help push us through our downside target. If data is weak then I wouldn’t look for downside momentum in today’s session.

Levels