U.S. Dollar Talking Points:
- The U.S. Dollar is up slightly from before the FOMC meeting, despite a seeming lack of detail in any specific regard.
- Fed Chair Jerome Powell was very evasive during the press conference, dodging a number of questions pertaining to politics and even cryptocurrencies while offering little of note regrading future policy parameters.
- The initial move after the Fed statement was USD strength and equity weakness as the Fed removed a phrase from the statement pertaining to inflation being on its way to the 2% goal. This seemed to initially be read as a hawkish development, but in the first ten minutes of the press conference was talked-down by Powell as he said no signaling was designed by the change as it was merely cleaning up the verbiage in the Fed’s announcement. That’s around when stocks began to rally and the U.S. Dollar erased the prior FOMC-fueled bounce.
From the daily chart today’s FOMC meeting was a relative non-event. Of course, this wasn’t expected to be a meeting filled with new developments as it’s not a quarterly meeting and the FOMC wasn’t expected to adjust rates. Powell, by and large, was in a position to evade and that’s precisely what he did, as there was little reason to tip markets in one direction or the other after three consecutive meetings with rate cuts.
On top of that there’s a flurry of economic data ahead with tomorrow’s ECB rate decision, where the bank is expected to cut, and then the Tokyo inflation data set for tomorrow night. This is followed by the Core PCE data on Friday morning which will give markets the next glimpse at U.S. inflation progress and this, when all is said and done, may end up being the biggest driver for the USD over the week. Stocks could be volatile on that, as well, but on that note, we’re getting some large corporate earnings reports with the market bellwether of Apple expected to announce quarterly results tomorrow after the bell.
At this point, the U.S. Dollar is very near the same levels from earlier in the session but the longer-term context here is a bit more interesting, which I’ll get into after the next chart.
U.S. Dollar 30-Minute Chart
Chart prepared by James Stanley; data derived from Tradingview
Monday Equity Sell-Off as USD/JPY Breaks
The weekly open looked nasty, at least initially, as equities were driven-lower and headlines abound about the ‘AI bubble bursting.’
While I don’t doubt that the DeepSeek news had something to do with the sell-off, it seemed illogical to ascribe the entire move to a fragile report of a competitor in the AI space.
Interestingly, that sell-off in stocks also showed alongside another possible risk factor and this one didn’t seem to get much attention, as both the U.S. Dollar and USD/JPY were selling-off. I talked about this in the Monday article, highlighting the potential of carry trade unwind, very similar to the driver that showed in Q3 of last year and ran aggressively until the morning of August 5th, when stocks finally bottomed following a flare in VIX to its third-highest level ever.
Later in Q3 and through Q4, that theme cooled and as U.S. Dollar strength came back, so did USD/JPY.
But last week marked the second rate hike from the Bank of Japan and inflation in Japan has been notably elevated, which may inspire even more hawkish moves down-the-road.
I looked at this in the Tuesday webinar but the carry trade is essentially a driver of leverage, as funds and banks can borrow in Japan at ultra low rates, and then invest that capital elsewhere with aim of pocketing the spread between rate differentials. This, in essence, allows cheap capital to flow into risker aspects of the market, so when we see carry trades unwinding, such as we saw last summer after the July 11th CPI report, that could quickly remove capital from a lot of pockets of the economy, such as tech stocks, or AI stocks.
This is a risk that has not been completely obviated yet, even if the DeepSeek news seems less threatening a few days later.
As stocks bounced on Monday and continued to rally through Tuesday, USD/JPY recovered a bit. So far today the 155.00 level has held as support, but this isn’t a bullish picture yet, as resistance had held at a lower-high and from the trendline projection taken from the high three weeks ago.
As I’ve been saying in videos, it’s the 150-151.95 zone that’s of interest for bigger picture themes and if sellers can slip price below that, larger problems may be ahead with a global de-leveraging event. For shorter-term structure, the 153.41-153.75 zone remains key support, and next resistance is the 156.67 Fibonacci level sitting overhead that caught the highs last week.
USD/JPY Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Strategist
U.S. Dollar Rallies on Fed Statement, Pulls Back on the Presser
It’s a busy week across macro markets and we’re just getting
started after the FOMC. Tomorrow’s ECB meeting is expected to see a cut but the
bigger item may be around Japan and USD/JPY.
U.S. Dollar Talking Points:
-
The U.S. Dollar is up slightly from before the FOMC
meeting, despite a seeming lack of detail in any specific regard.
-
Fed Chair Jerome Powell was very evasive during
the press conference, dodging a number of questions pertaining to politics and
even cryptocurrencies while offering little of note regrading future policy
parameters.
-
The initial move after the Fed statement was USD
strength and equity weakness as the Fed removed a phrase from the statement
pertaining to inflation being on its way to the 2% goal. This seemed to
initially be read as a hawkish development, but in the first ten minutes of the
press conference was talked-down by Powell as he said no signaling was designed
by the change as it was merely cleaning up the verbiage in the Fed’s
announcement. That’s around when stocks began to rally and the U.S. Dollar
erased the prior FOMC-fueled bounce.
Indices Forecast
From the daily chart today’s FOMC meeting was a relative
non-event. Of course, this wasn’t expected to be a meeting filled with new
developments as it’s not a quarterly meeting and the FOMC wasn’t expected to
adjust rates. Powell, by and large, was in a position to evade and that’s
precisely what he did, as there was little reason to tip markets in one
direction or the other after three consecutive meetings with rate cuts.
On top of that there’s a flurry of economic data ahead with
tomorrow’s ECB rate decision, where the bank is expected to cut, and then the Tokyo
inflation data set for tomorrow night. This is followed by the Core PCE data on
Friday morning which will give markets the next glimpse at U.S. inflation
progress and this, when all is said and done, may end up being the biggest
driver for the USD over the week. Stocks could be volatile on that, as well,
but on that note, we’re getting some large corporate earnings reports with the
market bellwether of Apple expected to announce quarterly results tomorrow
after the bell.
At this point, the U.S. Dollar is very near the same levels
from earlier in the session but the longer-term context here is a bit more
interesting, which I’ll get into after the next chart.
U.S. Dollar 30-Minute Chart
Chart prepared by James Stanley; data derived from
Tradingview
Monday Equity Sell-Off as USD Tests Support
The weekly open looked nasty, at least initially, as
equities were driven-lower and headlines abound about the ‘AI bubble bursting.’
While I don’t doubt that the DeepSeek news had something to
do with the sell-off, it seemed illogical to ascribe the entire move to a fragile
report of a competitor in the AI space.
Interestingly, that sell-off in stocks also showed alongside
another possible risk factor and this one didn’t seem to get much attention, as
both the U.S. Dollar and USD/JPY were selling-off. I
talked about this in the Monday article, highlighting the potential of carry
trade unwind, very similar to the driver that showed in Q3 of last year and
ran aggressively until the morning of August 5th, when stocks
finally bottomed following a flare in VIX to its third-highest level ever.
Later in Q3 and through Q4, that theme cooled and as U.S.
Dollar strength came back, so did USD/JPY.
But last week marked the second rate hike from the Bank of
Japan and inflation in Japan has been notably elevated, which may inspire even
more hawkish moves down-the-road.
I
looked at this in the Tuesday webinar but the carry trade is essentially a
driver of leverage, as funds and banks can borrow in Japan at ultra low rates,
and then invest that capital elsewhere with aim of pocketing the spread between
rate differentials. This, in essence, allows cheap capital to flow into risker
aspects of the market, so when we see carry trades unwinding, such as we saw
last summer after the July 11th CPI report, that could quickly
remove capital from a lot of pockets of the economy, such as tech stocks, or AI
stocks.
This is a risk that has not been completely obviated yet,
even if the DeepSeek news seems less threatening a few days later.
As
stocks bounced on Monday and continued to rally through Tuesday, USD/JPY
recovered a bit. So far today the 155.00 level has held as support, but this
isn’t a bullish picture yet, as resistance had held at a lower-high and from the
trendline projection taken from the high three weeks ago.
As I’ve been saying in videos, it’s the 150-151.95 zone that’s
of interest for bigger picture themes and if sellers can slip price below that,
larger problems may be ahead with a global de-leveraging event. For
shorter-term structure, the 153.41-153.75 zone remains key support, and next
resistance is the 156.67 Fibonacci level sitting overhead that caught the highs
last week.
USD/JPY Daily Price Chart
Chart prepared by James Stanley; data derived from
Tradingview
--- written by James Stanley, Senior Strategist
U.S. Dollar Talking Points:
- The U.S. Dollar is up slightly from before the FOMC meeting, despite a seeming lack of detail in any specific regard.
- Fed Chair Jerome Powell was very evasive during the press conference, dodging a number of questions pertaining to politics and even cryptocurrencies while offering little of note regrading future policy parameters.
- The initial move after the Fed statement was USD strength and equity weakness as the Fed removed a phrase from the statement pertaining to inflation being on its way to the 2% goal. This seemed to initially be read as a hawkish development, but in the first ten minutes of the press conference was talked-down by Powell as he said no signaling was designed by the change as it was merely cleaning up the verbiage in the Fed’s announcement. That’s around when stocks began to rally and the U.S. Dollar erased the prior FOMC-fueled bounce.
Indices Forecast
From the daily chart today’s FOMC meeting was a relative non-event. Of course, this wasn’t expected to be a meeting filled with new developments as it’s not a quarterly meeting and the FOMC wasn’t expected to adjust rates. Powell, by and large, was in a position to evade and that’s precisely what he did, as there was little reason to tip markets in one direction or the other after three consecutive meetings with rate cuts.
On top of that there’s a flurry of economic data ahead with tomorrow’s ECB rate decision, where the bank is expected to cut, and then the Tokyo inflation data set for tomorrow night. This is followed by the Core PCE data on Friday morning which will give markets the next glimpse at U.S. inflation progress and this, when all is said and done, may end up being the biggest driver for the USD over the week. Stocks could be volatile on that, as well, but on that note, we’re getting some large corporate earnings reports with the market bellwether of Apple expected to announce quarterly results tomorrow after the bell.
At this point, the U.S. Dollar is very near the same levels from earlier in the session but the longer-term context here is a bit more interesting, which I’ll get into after the next chart.
U.S. Dollar 30-Minute Chart
Chart prepared by James Stanley; data derived from Tradingview
Monday Equity Sell-Off as USD/JPY Breaks
The weekly open looked nasty, at least initially, as equities were driven-lower and headlines abound about the ‘AI bubble bursting.’
While I don’t doubt that the DeepSeek news had something to do with the sell-off, it seemed illogical to ascribe the entire move to a fragile report of a competitor in the AI space.
Interestingly, that sell-off in stocks also showed alongside another possible risk factor and this one didn’t seem to get much attention, as both the U.S. Dollar and USD/JPY were selling-off. I talked about this in the Monday article, highlighting the potential of carry trade unwind, very similar to the driver that showed in Q3 of last year and ran aggressively until the morning of August 5th, when stocks finally bottomed following a flare in VIX to its third-highest level ever.
Later in Q3 and through Q4, that theme cooled and as U.S. Dollar strength came back, so did USD/JPY.
But last week marked the second rate hike from the Bank of Japan and inflation in Japan has been notably elevated, which may inspire even more hawkish moves down-the-road.
I looked at this in the Tuesday webinar but the carry trade is essentially a driver of leverage, as funds and banks can borrow in Japan at ultra low rates, and then invest that capital elsewhere with aim of pocketing the spread between rate differentials. This, in essence, allows cheap capital to flow into risker aspects of the market, so when we see carry trades unwinding, such as we saw last summer after the July 11th CPI report, that could quickly remove capital from a lot of pockets of the economy, such as tech stocks, or AI stocks.
This is a risk that has not been completely obviated yet, even if the DeepSeek news seems less threatening a few days later.
As stocks bounced on Monday and continued to rally through Tuesday, USD/JPY recovered a bit. So far today the 155.00 level has held as support, but this isn’t a bullish picture yet, as resistance had held at a lower-high and from the trendline projection taken from the high three weeks ago.
As I’ve been saying in videos, it’s the 150-151.95 zone that’s of interest for bigger picture themes and if sellers can slip price below that, larger problems may be ahead with a global de-leveraging event. For shorter-term structure, the 153.41-153.75 zone remains key support, and next resistance is the 156.67 Fibonacci level sitting overhead that caught the highs last week.
USD/JPY Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Strategist
U.S. Dollar Rallies on Fed Statement, Pulls Back on the Presser
It’s a busy week across macro markets and we’re just getting started after the FOMC. Tomorrow’s ECB meeting is expected to see a cut but the bigger item may be around Japan and USD/JPY.
U.S. Dollar Talking Points:
- The U.S. Dollar is up slightly from before the FOMC meeting, despite a seeming lack of detail in any specific regard.
- Fed Chair Jerome Powell was very evasive during the press conference, dodging a number of questions pertaining to politics and even cryptocurrencies while offering little of note regrading future policy parameters.
- The initial move after the Fed statement was USD strength and equity weakness as the Fed removed a phrase from the statement pertaining to inflation being on its way to the 2% goal. This seemed to initially be read as a hawkish development, but in the first ten minutes of the press conference was talked-down by Powell as he said no signaling was designed by the change as it was merely cleaning up the verbiage in the Fed’s announcement. That’s around when stocks began to rally and the U.S. Dollar erased the prior FOMC-fueled bounce.
Indices Forecast
From the daily chart today’s FOMC meeting was a relative non-event. Of course, this wasn’t expected to be a meeting filled with new developments as it’s not a quarterly meeting and the FOMC wasn’t expected to adjust rates. Powell, by and large, was in a position to evade and that’s precisely what he did, as there was little reason to tip markets in one direction or the other after three consecutive meetings with rate cuts.
On top of that there’s a flurry of economic data ahead with tomorrow’s ECB rate decision, where the bank is expected to cut, and then the Tokyo inflation data set for tomorrow night. This is followed by the Core PCE data on Friday morning which will give markets the next glimpse at U.S. inflation progress and this, when all is said and done, may end up being the biggest driver for the USD over the week. Stocks could be volatile on that, as well, but on that note, we’re getting some large corporate earnings reports with the market bellwether of Apple expected to announce quarterly results tomorrow after the bell.
At this point, the U.S. Dollar is very near the same levels from earlier in the session but the longer-term context here is a bit more interesting, which I’ll get into after the next chart.
U.S. Dollar 30-Minute Chart
Chart prepared by James Stanley; data derived from Tradingview
Monday Equity Sell-Off as USD Tests Support
The weekly open looked nasty, at least initially, as equities were driven-lower and headlines abound about the ‘AI bubble bursting.’
While I don’t doubt that the DeepSeek news had something to do with the sell-off, it seemed illogical to ascribe the entire move to a fragile report of a competitor in the AI space.
Interestingly, that sell-off in stocks also showed alongside another possible risk factor and this one didn’t seem to get much attention, as both the U.S. Dollar and USD/JPY were selling-off. I talked about this in the Monday article, highlighting the potential of carry trade unwind, very similar to the driver that showed in Q3 of last year and ran aggressively until the morning of August 5th, when stocks finally bottomed following a flare in VIX to its third-highest level ever.
Later in Q3 and through Q4, that theme cooled and as U.S. Dollar strength came back, so did USD/JPY.
But last week marked the second rate hike from the Bank of Japan and inflation in Japan has been notably elevated, which may inspire even more hawkish moves down-the-road.
I looked at this in the Tuesday webinar but the carry trade is essentially a driver of leverage, as funds and banks can borrow in Japan at ultra low rates, and then invest that capital elsewhere with aim of pocketing the spread between rate differentials. This, in essence, allows cheap capital to flow into risker aspects of the market, so when we see carry trades unwinding, such as we saw last summer after the July 11th CPI report, that could quickly remove capital from a lot of pockets of the economy, such as tech stocks, or AI stocks.
This is a risk that has not been completely obviated yet, even if the DeepSeek news seems less threatening a few days later.
As stocks bounced on Monday and continued to rally through Tuesday, USD/JPY recovered a bit. So far today the 155.00 level has held as support, but this isn’t a bullish picture yet, as resistance had held at a lower-high and from the trendline projection taken from the high three weeks ago.
As I’ve been saying in videos, it’s the 150-151.95 zone that’s of interest for bigger picture themes and if sellers can slip price below that, larger problems may be ahead with a global de-leveraging event. For shorter-term structure, the 153.41-153.75 zone remains key support, and next resistance is the 156.67 Fibonacci level sitting overhead that caught the highs last week.
USD/JPY Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Strategist
