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A Close Watch on the Forex World and the S&P 500 after the Central Banks Meetings

By:
David Frank
Updated: Sep 22, 2016, 07:33 UTC

Points to consider in this Forex article: The Bank of Japan took an unorthodox approach towards easing and the Federal Reserve kept rates on hold. Both

Currencies

Points to consider in this Forex article:

The major central banks have had their moments in the spotlight this month. The financial markets set policy and their moves were met with more skepticism. The BOJ sees a shift to long-term rates to help the country’s banks as the BOJ stimulus program, will operate to keep the 10 JGB at zero with yield curve protection in place. This will remain until the country’s inflation rate is above the target of two percent. The Federal Reserve opted to keep rates on hold but promised a rate hike in the near future.

So what happened? The Japanese yen rose and the US Dollar fell lower.

The Japan’s central bank, is seemingly throwing in the towel and will not fight the Forex market’s current. They want to try and keep a firm anchor in rough, turbulent waters. The yen will look to extend gains and benefit from the front run yields. The BOJ did this to motivate breaks with follow through and a dangerous shift to risk trends. These trends have been undermined as investor confidence with central bank monetary policy continues to erode.

Traders are now seeing a concerted selling in risk assets like the S&P 500, global equities high yield asset classes and emerging markets. There is an inflow of capital to the USD/JPY, the EUR/JPY and the AUD/JPY.

Looking at the US Dollar, there is a passive buoyancy pervasive in the Forex market. This should stem the slide with the almighty buck. The short-term range looks very appealing when you concentrate on fundamentals. The AUD/USD and the USD/CAD (the Loonie) are trading much closer to technical levels right now and look appealing. The Sterling Dollar, or GBP/USD Forex market looks more attractive, even though there is no real recovery in this market at this time. This market is in a passive range right now as traders are more focused on the Brexit fallout and looming Article 50 notification from the United Kingdom.

There are some key calendar events on the horizon. These will focus on risk assessment and traders should note these carefully. These are with the Brexit and the euro health assessment is due with the first ESRB meeting.

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