Like most other securities, safe-havens have seen light action during this pre-FED session. The USD/JPY and USD/CHF are in the midst of posting muted trading ranges, with gold sliding more than $4.25 per ounce. U.S. indices remain very near all-time highs, led by the DJIA DOW trading above 27,050 as the closing bell approaches. If Wednesday’s FED Interest Rate Decision comes in dovish as expected, one has to expect the U.S. stock market to continue its 3-year rally into rarefied air.

It is worth mentioning that the CME FEDWatch Index currently sits at 97.3% in favor of a 30 October ¼ point reduction in the Federal Funds Rate. This figure has been relatively static for several weeks now, but is up from 49.2% one month ago. 

At this juncture, there is a strong likelihood that Wednesday’s rate cut is already priced into most securities, including equities. However, the markets will still be hanging on Jerome Powell’s every word at the FOMC Press Conference. His tone will very likely be non-committal as always, yet there appears to be growing angst over slowing economic conditions among FED members. If Q3 GDP is revised downward substantially during Wednesday’s pre-market hours, then Powell’s 2:30 PM EST presser may turn out to be a major market driver.

Let’s take a look at the key macro resistance level coming into view for the USD/JPY.

USD/JPY Closes In On August’s Highs

Since the highs of last April, it has been all downhill for the USD/JPY. However, this may be beginning to change. Rates are back above 108.50 and are in a position to challenge August’s High (109.31).

Here are two levels to keep an eye on as the FED Interest Rate Decision approaches:

• Resistance(1): August’s High, 109.31
• Support(1): Daily SMA, 108.58

Bottom Line: The economic calendar for the coming U.S. overnight features release of Retail Trade statistics from Japan. While these numbers aren’t considered primary market drivers, they may have some influence on the USD/JPY. In the event bullish sentiment follows release of Japan’s Retail Trade (Sept.) report, a short from August’s High may come into view.

Until Wednesday’s FED Interest Rate Decision, I will have sell orders in the queue from 109.24. With an initial stop loss at 109.54, this trade produces 25 pips on a sub-1:1 risk vs reward ratio.

The coming 24 hours features an abundance of market movers, led by U.S. Q3 GDP and the FOMC Press Conference. If you are going to be active in the forex, be sure to have your stop losses down and leverage firmly in check.