USD/JPY dropped 10 pips on nothing new on the FOMC minutes

• The Minutes of the Aug 1 FOMC meeting said that many participants saw another hike likely 'soon'
• USD/JPY has dropped a handful of pips on the Fed minutes, trading at 110.44 at the time of writing immediately after the minutes were released, down from 110.52 on the five-minute sticks. 
• S&P is adding gains while US yields are steady.
• The dollar is slightly lower across the board. 

USD/JPY has lost about 10 pips on the back of the Minutes of the Aug 1 FOMC meeting's minutes. The key takeaway from the minutes is that the FOMC generally expected further gradual hikes, although they see that trade, housing and emerging markets as downside risks. The FOMC also expected GDP growth would slow in second half of the year but remain above potential.

Further key notes:

• Officials note rates moving closer to estimates of neutral.
• Further gradual hikes to help keep econ. 
• Some see fiscal as upside risk, few see as the future downside.
• Trade poses important source of uncertainty.
• Discussed implication of yield-curve flattening.
• The weighed timing of when to stop calling rates accommodative.
• Many officials see inflation stable near 2% m-term.
• Officials discussed bank counter-cyclical capital buffers.

Eyes on US politics, geopolitics and Jackson Hole

There has been a muted reaction to these minutes and instead, markets are now looking towards risk associated to yesterday’s guilty plea from Trump’s former attorney, Michael Cohen, on Federal charges. That initially sparked ‘mild’ demand for safe-haven assets. The implications are risk sensitive and there is going to be more to follow as this all pans out, for Trump's legal woes could well sap up more attention from markets in time to come. At the end of the week, we also have the Jackson Hole and markets will be looking to Powell's speech on Friday as the main highlight - It will be watching for hints of changes to the future monetary policy framework - analysts at ANZ argue that Powell will hold steady on rate guidance.

USD/JPY levels

The Cloud cover and converging 21- & 55-DMAs by 111 the figure has been a hard area of resistance. On a wide breakthrough there, the August 1st high at 112.15. The 113 handle is the main objective for the bulls but on a break below the 200 day moving average at 109.83, risk will be open to 108.10 but there will not be any great shakes before Powell. 

"We suspect that rallies will remain capped by 110.80/111.00. While the 109.85 200 day ma underpins, we look for a retest of the current August high at 112.15 above which sit the July peak and 200 week moving average at 113.18/35," analysts at Commerzbank argued.