Traders have added to bets the Fed will cut its 5.25 percent overnight lending rate as soon as October, narrowing the yield advantage of Treasuries over Japanese and European debt. The European Central Bank and Bank of Japan have signaled they may have to raise interest rates.
Asian currencies also advanced against the dollar as regional stock markets rebounded.
U.S. central bankers will leave borrowing costs unchanged, according to all 96 economists surveyed by Bloomberg News.
Interest-rate futures showed traders see an 84 percent chance the Fed will lower its key rate a quarter-percentage point to 5 percent in October, up from 48 percent a week ago. The odds for a half-point cut by December increased to 40 percent from zero. Merrill Lynch & Co. yesterday said the Fed will reduce rates in October as the turmoil in the credit markets and falling home prices slow growth.

The following technical analysis gives us a detailed lookout on what is expected to happen to the pair.

The buying point of USD/JPY is at 119.40; based on a strong support which was previous resistance.
- Fibonacci retracement 61.8% is the take profit at 119.90
- Previous support will be the stop loss at 118.53

The selling point is at 118.01; based on a breaking of the previous support
- Lowest support on hourly chart will represent the take profit at 117.39
- The Stop loss will be placed at 118.74

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of the two moving averages below the zero line, the shorter term moving average is faster than the long term and is pointing upwards with break of zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI, we can determine that the market is in an uptrend.

The momentum oscillator is very important to understand the strength of the market and as we see on the graph; it break the zero line upwards. The Stochastic oscillator breaks 20% line and moving upwards.

* The following analysis is for information only; Finotec is not responsible for any
decisions or misinterpretations based on the given text.

By Finotec’s professional analyst,
Tony B.

dealingdesk@finotec.com