- The dollar corrects the losses and returns to exceed 148.00.
- A string of positive US data refutes the Fed easing theory.
- USD/JPY: Consolidates between 145.50 and 146.90 – UOB.
The dollar pulls back from session lows at 147.00 to trim losses from the Asian and European sessions and return to levels above 148.00. The release of a series of better-than-expected US macroeconomic indicators has buoyed a hitherto weak dollar.
US data refutes Fed easing theory
US macroeconomic data rattled currency markets on Tuesday, improving sentiment on US economic momentum and undermining the idea that the Federal Reserve may be forced to consider slowing its path of monetary tightening. in December. This new scenario has pushed up the dollar and the yields on US Treasury bonds.
US manufacturing activity has beaten expectations in October, easing concerns about the possibility of some economic weakening caused by earlier disappointing figures. The US manufacturing PMI has registered a reading of 50.2, against the 50 expected by the market, while the S&P PMI confirmed the upbeat news with the October reading, which improved to 50.4 and returned to consistent figures with expansion, versus market expectations for a flat return at 49.9.
Additionally, JOLTS job openings have increased to 10.7 million vacancies in September, up from 12.2 million in August, and against market expectations of a decline to 10 million. These figures highlight the tightness of the US labor market, despite the Fed’s efforts to cool it to curb inflation.
The US Federal Reserve’s monetary policy meeting, scheduled for Wednesday, remains the main attraction this week. The Fed is expected to raise rates by 75 basis points, but the market was increasingly confident that the Fed would signal a softer rate hike in December, a theory that has been called into question by today’s releases.
USD/JPY continues to consolidate between 145.50 and 149.60 — UOB
Looking at a broader perspective, FX analysts at UOB see the pair in a consolidation range between 145.50 and 149.60: “USD (…) fell as low as 145.10 before rebounding sharply and the build-up of downward momentum quickly faded. USD appears to have entered a consolidation phase and is likely to trade between 145.50 and 149.60 for now.”
Technical levels to watch
Source: Fx Street
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