CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Two trades to watch: USD/JPY, FTSE

Article By: ,  Senior Market Analyst

USD/JPY rises ahead of the Fed minutes, PMIs

The minutes are from the November Fed meeting where the US central bank hiked rates by 75 basis points. The statement had a dovish tilt to it, highlighting the lag time between the rate hike and the impact being realised in the real economy.

However, Fed Chair Powell pushed back against the idea of a dovish pivot. He said that the terminal rate would likely be higher.

Since the meeting, inflation data has cooled, and some Fed speakers have said that they consider the time is approaching for a downshift in the pace of rate hikes. The minutes should shed light on where policy members are.

Any sense of a less hawkish stance could pull the USD lower.

US PMI data will also be in focus and is expected to slow to 47.7 in October, down from 48.2 in September. The level 50 separates expansion from contraction.

Where next for the USD/JPY?

USD/JPY has rebounded off the November low of 137.67, pushing back above the 140.00 psychological level and the 100 sma. The pair hit resistance at 142.25, the weekly high. The RSI is below 50, suggesting the sellers could have momentum on their side.

Sellers will look to break below the 100 sma at 141.85 to expose 140.00 and open the door to 137.67. A break below this level creates a lower low.

Should buyers successfully defend the 100 sma, bulls could look for a move over 142.25, the weekly high, to expose the 50 sma at 145.00.

 

FTSE heads higher with PMI data due

The FTSE is heading cautiously higher, adding to solid gains from the previous session, as investors look past rising COVID cases in China and ahead of the Fed minutes later in the day.

Optimism that the Fed could slow the pace of rate hikes helped Wall Street end the day higher, and that optimism is translating over to a higher open in Europe.

Attention will be on the UK PMI data, which is expected to show further contraction. The UK composite PMI, often considered a good gauge for business activity, is likely to fall to 47.5, down from 48.2. The service sector, the dominant sector in the UK, is expected to contract further to 48 from 48.8.

The data is as good as confirming that the UK economy is contracting. The data comes after the OECD warned that the UK economy will contract by 0.4% in 2023 before rising just 0.2% in 2024.

Where next for the FTSE?

The FTSE has formed a series of higher highs and higher lows since mid-October. The price has risen above the 50 & 200 sma and has pushed over resistance at 7420. This, combined with the RSI above 50, keeps buyers hopeful of further upside.

Buyers will look for a move over 7485, the September high, to extend gains towards 7580, the August high.

Sellers could look for a move below 7420 to expose the 200 sma at 7320 and the multi-month rising trendline support at 7270.

 

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