Market trades cautiously ahead of Fed and BOJ meeting

Both the US Fed and BOJ will make their interest rate decisions in the following days to come, which will set the tone in the markets and potentially bring a lot of volatility. 

Traders tend to take fewer risks ahead of central bank’s meetings. According to Bloomberg, the world implied interest rate probability of a September rate hike has dropped to around 20% from 40% three weeks ago, due to lackluster non-farm payrolls. Therefore, the market will place relatively low expectations of an immediate rate hike for September. The chance of a December rate hike stands at 55%, in line with major stock brokers’ forecasts.

Dollar index December future retraced a little bit last night to 95.75. Sterling rebounded against USD for a second day after reaching a two months low of 1.3000 – a key support level in the near future. 

BOJ meeting in spotlight
The BOJ meeting probably carried more uncertainties, as the central bank has disappointed the markets a number of times this year and the yen has almost always surged against other currencies after BOJ meetings. The risks are that if BOJ does not provide as much as stimulus as they have promised previously, the yen could likely surge again. 

Right now USD/JPY is traded at 101.96 area, with the immediate support and resistance levels at 100.00 and 103.49 respectively. 

Commodities rebound on weaker dollar
Crude oil prices rebound mildly last night due to weaker dollar. Traders are waiting for this week’s DoE crude inventory data to find clues of any changes of the supply-demand relationship. Rebound in commodities prices has fueled the rally in energy shares, which buoyed the European stock market.

Silver rallied 2.3% to US$19.22, outpacing gold price which advanced 0.6% to US$1,317 last night. For Silver, the immediate support and resistance levels are at $18.50 and $20.15 respectively. 

USD/JPY

CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.