I'm going long USD for a run into the FOMC
I've had a think about it and I like the look of a USDJPY long into the FOMC.
I've just gone long USDJPY at market because I see some good reasons why we might get a move up into the FOMC.
Part 1 - Pre-FOMC
- I can see some scope for a small squeeze higher after the BOJ induced slide in Asia
- While expectations may be low for an FOMC hike, that won't stop position squaring from shorts, nor some from taking speculative longs, like we've seen time and time again before FOMC's
Part 2 - Over FOMC
- I believe the market is very much underestimating the possibility a hike or indeed a hawkish message.
- Inflation is higher than when they hiked in Dec and unemployment is lower than when they hiked in Dec. That's their mandate pure and simple. They might not have moved by much but they've gone the right way.
Let me be clear, this trade is a bit of a punt based more on my gut feeling, and experience in watching markets for years, than anything else. Running it overnight does hold some risk as I won't be able to monitor it so I'll have a disaster stop in place. What I want to see is the trade move into profit under part 1, so I've got some margin to run into part 2. I'll be watching the CPI report very closely tomorrow as it might be the reason I stay in or exit.
I see two short term support levels at 112.60 and 112.15/20 and I may drop some small bids in against one or both of those too (if I pick just one it will be the lower of the two). My stop will be somewhere south of 112.00 but I haven't decided exactly where yet. I'll leave that until as late as possible before hitting the sack.