Medium term
Trade view / 21 November 2016 at 22:30 GMT

Fed rate decision: No hike, benign inflation

APAC Sales Trading Desk / Saxo Capital Markets
Singapore
Instrument: USDJPY
Price target:
Market price:

Background


The hike and potential for further hikes should provide a boost to the US dollar in the short term, but should incoming inflation data disappoint, the Federal Reserve will be forced to adopt a more dovish tone.

For traders who think 2017 will look a lot like 2016 with inflation expectations surprising to the downside and the Fed not delivering on their current planned rwo hikes, the USDJPY reverse knock in is the strategy to adopt here.

The initial bounce in US dollar followed by weak inflation prints changing inflation expectation will send US dollar lower.

Parameters

- Sell USD vs emerging markets:
- Sell USDINR 1 Month at market, target 65.00
- Sell USDIDR 1 Month at market, target 12500.
- Buy NZD 6-month Call Spread 0.74 vs 0.78 strikes for 90 USD pips.

USDJPY five-year chart

m Source: SaxoTraderGO

Editor's note: Please look at our dedicated rate-hike page for other scenarios that could result from the December meeting of the Federal Open Market Committee.

-- Edited by Robert Ryan


Non-independent investment research disclaimer applies. Read more

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail