Key Points:
The U.S. dollar’s performance continues to reflect strong economic outperformance, especially after unexpectedly robust payrolls data last week. The dollar index (DXY) remained close to its two-month high, hovering at 102.89.
This upward trend underscores a growing consensus that the Federal Reserve will adopt a measured approach to any further easing, a stance reinforced by the minutes from the Fed’s latest meeting.
Meanwhile, traders await the release of September’s Consumer Price Index (CPI), expected to show core U.S. inflation at 3.2% year-on-year.
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The outcome of this report could shape market sentiment regarding the Federal Reserve’s next moves.
San Francisco Fed President Mary Daly commented that while inflation remains a concern, the central bank is increasingly focused on maintaining a healthy labour market.
Picture: USD/JPY holds near 149.25, supported by moving averages as the pair eyes a potential breakout above 149.50 as seen on the VT Markets app.
From the chart above, we can see that USD/JPY closed at 149.245, showing a minimal decline of 0.02% during the session. The pair traded within a tight range, hitting a high of 149.545 and a low of 149.001, reflecting a relatively stable session with small movements in either direction.
The price is currently supported by the 5, 10, and 30-period moving averages, which are all trending upward, suggesting a continuation of the bullish momentum.
The MACD (12, 26, 9) is also in positive territory, with the MACD line above the signal line, reinforcing the bullish outlook. The histogram shows positive bars, indicating increasing upward momentum.
Support is visible near 149.001, while resistance is just above at 149.500. If the price breaks above this level, it could signal a continuation of the uptrend, while a move below support may lead to a short-term pullback.
This movement suggests continued strength in the U.S. dollar, propelled by what analysts like Kyle Rodda describe as “U.S. exceptionalism,” a narrative driven by the country’s superior economic performance relative to other regions.
Despite some forecasts predicting a total of 50 basis points in rate cuts across the remaining Fed meetings this year, traders seem reluctant to make strong moves without clearer signals from Fed officials.
We see the dollar maintaining its current levels, with room for incremental gains depending on how the CPI data plays out.
Traders will likely continue to reassess the Federal Reserve’s stance, particularly if inflation deviates from the forecasted 3.2%.
If U.S. inflation comes in higher than expected, it could spark a reevaluation of rate cut expectations, with traders adjusting their positions accordingly.
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