As we are heading towards the most crucial event of the year FOMC statement. As per the survey 49% of an analyst are expecting rate hike by 25bps and that was expected long ago. But what matters is the Dovish tone.
But what does that matters to us? Well all we need is volatility and looking at the option price we assume high volatility will remain in the coming weeks. Hence we advice ( Short butterfly option strategy)
Sell 1 8000 CE at 71
Sell 1 7800 CE at 190
Buy 2 7900 CE at 226
Pay off :-
USD/JPY attempts tepid recovery in Asia, tests 124
The USD/JPY pair posed a minor recovery in the mid-Asian trades, as the USD bulls jumped back into the bids mainly driven by a short-covering rally after the major dropped sharply to fresh three-week lows on Wednesday following the release of FOMC minutes which surprised the markets to the downside..
Currently, the USD/JPY pair trades 0.11% higher at 123.94, finding it difficult to regain 124 handle. The dollar-yen pair keeps the bid tone intact in Asia, extending its recovery mode from 124.68 levels reached as the US dollar fell further in to losses after the Fed minutes turned out to be dovish, with no clear sign of an imminent September hike..
Dovish FOMC minutes keep USD undermined in Asia, UK Retail Sales eyed
Broad based US dollar weakness persists in Asia, lifting most G10 currencies across the FX board. The European currency was biggest gainer, sitting firmly above 1.11 barrier. Kiwi also climbed higher despite weak NZ fundamentals, while the gains in the Aussie were checked on tumbling Chinese equities amid no rescue effort seen from the Chinese authorities so far. USD/JPY is striving for 124 handle, staging a comeback from previous drop somewhat.
A relatively data-quiet Asian session, with most Asian currencies enjoying gains from broad based US dollar weakness induced by the dovish FOMC July 29 meeting. Despite, persisting greenback softness, USD/JPY tries to recover lost ground mainly driven profit-taking after the recent fall.
The minutes last night revealed that the policymakers at the Federal Reserve thought that the jobs market was near the point that would justify a rate hike, but the inflation side of the mandate remained a major obstacle for the first increase in benchmark interest rates in almost a decade.
Pound falls to 2-week lows vs. stronger dollar
The pound fell to two-week lows against the U.S. dollar on Tuesday, as expectations for a U.S. rate hike in the coming months continued to lend broad support to the greenback.
GBP/USD hit 1.5385 during European morning trade, the pair’s lowest since May 8; the pair subsequently consolidated at 1.5415, sliding 0.36%. Cable was likely to find support at 1.5241, the low of May 8 and resistance at 1.5591, the high of May 20. The dollar was boosted after Federal Reserve Chair Janet Yellen reiterated Friday that the bank still expects to start raising interest rates later in the year if the economy continues to improve as expected.
| Important events and their explanation: |
| Time ( IST) | Currency | Economic Data | Expectation | Previous |
| 12:15pm | USD | FOMC Member Williams Speaks | ||
| 2:00pm | GBP | Retail Sales m/m | 0.40% | -0.20% |
| 6:00pm | USD | Unemployment Claims | 272K | 274K |
| 7:30pm | USD | Existing Home Sales | 5.45M | 5.49M |
| USD | Philly Fed Manufacturing Index | 6.9 | 5.7 |
Explanation:- Out of the above data’s US Unemployment claims and Exiting home sales would considered as the most important. We assume above data’t to come positive which would be positive for the USD.
| Quick Glance : |
| Instrument | Price | %Chg | Volume | OI |
| USD/INR | 65.24 | 0.17 | 788526 | 960103 |
| EUR/INR | 72,57 | -0.82 | 37048 | 48836 |
| GBP/INR | 102.24 | 0.07 | 21059 | 41217 |
| JPY/INR | 52.63 | -0.64 | 7908 | 15311 |
| Technical touch : |
After China’s currency war, USDINR pair lost its sheen and traveled above 65.00 marks. Looking at the current macro picture we assume INR might further fall till 65.60 levels after fall till 65.10 levels.