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
Instrument: USDJPY
Price target:
Market price:


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.


- 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


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