- Capped below 147.00, the dollar falls for the third day in a row.
- Dollar weakens as market assumes a Fed pivot.
- USD/JPY: A decline to 144.00 — UOB is increasingly likely.
The US dollar’s attempted recovery from multi-week lows in the 145.00 area seen during Thursday morning European trade was capped at 147.00 and the pair USD/JPY it later dropped back below 146.00 at the time of writing.
Fed pivot expectations continue to weigh on the dollar
The pair is down 0.3% on the day, and is on track to close a three-day reversal, its worst showing since late July, as investors begin to price in a slowdown in the pace of Fed monetary tightening. A series of disappointing macroeconomic data has raised alarm bells about the possible negative effect of the aggressive rate hike path that has pushed the US dollar around 20% this year.
The bank is expected to raise rates by 75 basis points next week; however, markets are increasingly speculating on a slowdown to a 0.50% rise at the December meeting.
On the macroeconomic front, the optimistic US Gross Domestic Product, which rebounded at an unexpected 2.6% annual rate, after two consecutive contractions in previous quarters, has not provided any relevant support to the dollar.
USD/JPY: Further decline to 144.00 seems possible — UOB
UOB FX analysts see further downside potential in the pair, though still capped at 144.00: “Yesterday (Oct 26) USD lost 1.05% (NY close 146.35) and bearish momentum is building, though timidly.In the coming days, the USD could go lower, but at this point, the chances of a sustained decline below 144.00 are not high.To the upside, the break of the “strong resistance” level at 148.80 would indicate that the pent-up momentum has vanished.
Technical levels to watch
Source: Fx Street
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