Narrative. Perception. Sentiment. That is what I saw tonight in play after the Bank of Japan released its statement on monetary policy. The USD/JPY was trading today around 153.786 at 1:00 pm EST. At 2:00 pm EST, when the Federal Open Market Committee released its statement, the yen had fallen, reflected in a USD/JPY of 154.648. The dollar strengthening would continue with the currency pair priced at 155.225 just when the Bank of Japan released its statement.
“Moderation” was the word of the day for the BOJ. Japan’s economy recovered moderately. And that was okay because, according to the BOJ, the rest of the world was on the moderation train as well.
Employment, income, fixed business investment, all improving moderately.
The FOMC was cogent and muscular when it released its statement on monetary policy. The U.S. economy was expanding at a solid pace. Inflation was progressing toward the FOMC’s two percent objective, even if inflation was elevated. No wishy-washy inflation ranges. The flexible inflation average target policy (wishy-washy) has long been abandoned.
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I have observed that retail traders have little to go on in terms of real, actionable information. We are not inside the walls of the interbank market. I am personally not impressed with candlesticks and other charting mechanisms because the information is mostly second-hand sentiment, but right now, it is the best that we can do.
The muscular narrative will have an edge on selling the value of a currency.
Alton Drew
18 December 2024
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