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The dollar continued its upward momentum on Thursday, reaching its highest level against the yen in a month, as solid U.S. jobs data reinforced expectations that the Federal Reserve is in no rush to cut interest rates.
Picture: USD/JPY climbs towards 147.24 resistance with strong bullish momentum, but MACD hints at possible slowing ahead, as seen on the VT Markets app.
The USD/JPY is in a bullish trend, with strong upward momentum supported by the price staying above key moving averages.
The MACD remains positive, though showing signs of flattening, signalling potential slowing momentum. Keep an eye on the resistance for a breakout or potential retracement.
The ADP National Employment Report showed U.S. private payrolls added 143,000 jobs in September, surpassing forecasts and giving the market a boost ahead of Friday’s non-farm payrolls report.
If Friday’s report meets or exceeds expectations, we could see further dollar strength as traders become more confident in the U.S. economic outlook.
The yen came under heavy selling pressure after Japan’s new prime minister indicated that the country is not ready for additional rate hikes.
Following his comments and a meeting with the Bank of Japan governor, the USD/JPY pair rose to 146.575, and briefly touched 146.885, a level not seen since early September.
Japan’s dovish stance contrasts sharply with the resilience in the U.S. economy, making the yen less attractive for traders seeking higher yields.
Meanwhile, the euro remained subdued, hovering near a three-week low at $1.10455.
European Central Bank policymaker Isabel Schnabel’s unexpectedly dovish remarks on inflation led to increased speculation of a rate cut this month, putting further downward pressure on the single currency.
Traders seem reluctant to push the euro higher until there’s more clarity on the ECB’s monetary policy.
The dollar index, which measures the greenback against six major currencies including the euro and yen, ticked up to 101.70, extending a 0.45% gain from the previous session.
This was further supported by safe-haven demand as tensions in the Middle East flared up after Iran launched a series of ballistic missiles into Israel.
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While markets initially sold off risk-sensitive currencies like the Australian dollar and sterling, the absence of immediate retaliation from Israel allowed traders to recover some composure, with the Australian dollar stabilising at $0.6884.
Sterling remained steady at $1.3261, with little movement in the absence of fresh economic data from the UK.
However, traders will be keeping a close eye on global developments as any escalation in Middle Eastern tensions could lead to further volatility in currency markets.
As markets look ahead, traders are closely watching the U.S. non-farm payrolls report, which is due on Friday.
Expectations for a 50 basis-point rate cut in November have dropped to 34.6%, down from 57.4% a week ago, as traders reassess the likelihood of aggressive easing.
The stronger-than-expected ADP report suggests that the payrolls data may not disappoint, further reducing the odds of a sharp rate cut.
As the week unfolds, all eyes will be on the non-farm payrolls report and any further developments in the Middle East, both of which could have a considerable impact on market sentiment and currency movements.
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