USDJPY is trading with a negative trend ahead of Fed

During Tuesday’s Asian session, the USDJPY is hovering around the 131.00 line, indicating that it is still negative. Although US Treasury (UST) bond rates rose on Monday, the USDJPY failed to benefit considerably.

The US dollar is under pressure as a result of a faltering global banking sector and surplus liquidity.

This can be related to the global banking sector’s difficulties, as numerous commercial banks began to crumble last week. As a result, investors raced to buy UST bonds, leading yields to fall. USDJPY closely follows the direction of UST yields, thus it is not surprise that the US Dollar remains under pressure. In addition to the Fed’s discount window, the Federal Reserve resumed swap lines earlier this week to offer US Dollar liquidity to central banks in need. Because of this quick move, the market has been saturated with extra US Dollar liquidity, resulting in broad weakening.

USDJPY Investors are bracing for potential turbulence as the market anticipates a 25 basis point rate rise from the Fed.

As the market approaches Wednesday’s Caution is urged ahead of the FOMC meeting. The global financial system is already stressed, and an increase in borrowing prices might aggravate current problems. The market expects the Fed to raise interest rates by 25 basis points (bps).

Trading during the FOMC event requires extra caution because this is not a routine meeting with predetermined expectations. Volatility is to be expected with investors split over numerous issues. It is usually advised to be extra cautious, as the market may reverse during the news conference.

It’s critical to pay attention to Fed Chair Jerome Powell’s press conference since the media will be looking for any unexpected comments that might cause market volatility.