The U.S. dollar continued to demonstrate resilience after a string of positive economic data reinforced confidence in the U.S. economy, calming earlier recession anxieties.
This newfound strength in the dollar is particularly visible against the Japanese yen, with the USD/JPY pair hovering close to 149.11, near its highest level since early August.
This boost in the dollar’s value is largely attributed to a surge in Treasury yields, which came as traders scaled back their expectations for an aggressive rate cut by the Federal Reserve.
Additionally, the number of Americans filing for unemployment benefits dropped to 227,000, below the expected 235,000, further underscoring the strength of the U.S. labour market.
The dollar index, which tracks the greenback against six major currencies, remained stable at 103.20 after experiencing a robust 0.41% rally overnight.
This marked its strongest one-day gain in four weeks. While the dollar eased slightly against the yen, it still stayed within striking distance of the 149.40 level, a peak last reached on August 2.
See: Dollar index strengthens as seen on the VT Markets app.
What should we make from this? Taking a look at the technicals, the 30-minute chart for USDX shows a recent recovery from the 102.075 support level, pushing towards the 102.785 resistance level, but facing resistance near the 103.000 level.
The moving averages (MA 5, 10, 30) are beginning to converge, indicating a potential shift in momentum. The MACD histogram reflects a decrease in bullish momentum, as shown by the declining green bars, suggesting that the recent upward push might be losing steam.
Our view is that a sustained move above 102.785 could challenge the 103.000 resistance, while failure to hold above this level might see a retest of lower supports.
Risk-sensitive currencies, including the British pound and the Australian dollar, also benefited from the improved global economic outlook. Sterling edged up to $1.2859, building on its 0.21% gain from the previous session, bolstered by strong GDP figures out of the U.K. Similarly, the Australian dollar held steady at $0.66105 after advancing 0.2% on the back of unexpectedly strong job growth data.
You might be interested: Australian dollar faces resistance while kiwi advances awaiting rate decision
However, the euro remained flat at $1.0973, struggling to recover from its 0.36% slide in the previous session. While the economic landscape is improving, the euro’s performance underscores the varying impacts of global economic developments on different currencies.
Given the current data flow and market sentiment, the U.S. dollar may continue to strengthen in the short term, especially if upcoming economic reports further support the “soft landing” thesis. However, traders should remain cautious, as any unexpected negative data could quickly alter the outlook and lead to heightened market volatility.
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