USD/JPY has whipsawed over the past two sessions. General risk aversion and a strong USD 2-year note auction hurt the big dollar over the past day.
The former wedge formation has now clearly broken to the downside. We have been patient with this trade, waiting for a clear sell signal and fell like it has now arrived. We are below all the major moving averages and support is tenuous.
The big news in the day ahead will the FOMC interest rate decision at 2:15 p.m. ET. This is one of the least-anticipated decisions in recent years but it will still generate a market reaction. It’s virtually set in stone that the Fed will leave rates between 0 and 0.25% and keep the “extended period” language. The focus will be on the economic sentiment. With U.S. housing starts expected to fall by nearly 100K when the data is released later today, it’s safe to say that the Fed will have to take out the line that says housing starts “have edged up.” The employment assessment could also be downgraded and that would weigh on USD/JPY.