- The dollar’s rebound from 145.15 remains limited below 146.00.
- The market has turned cautious ahead of the US election results and CPI data.
- USDJPY risks further decline to 142.00 — SocGen.
The dollar’s recovery from two-week lows around 145.15 lost momentum at 146.55 early on Wednesday, before pulling back to levels just above 146.00. The pair USD/JPY remains moderately buying on the daily charts, paring losses after a 1.85% decline in the previous three days.
Markets cautious on the uncertainty of the US elections
Investors were cautious on Wednesday, favoring the safe-haven dollar amid uncertainty over the results of the US midterm elections. The Republican “red wave” has not been seen, and both parties are in a tight race to decide control of Congress and the fate of Joe Biden’s 2023 agenda.
In the absence of key macroeconomic events, the highlight of the week will be the release of US consumer inflation data. These numbers could provide insight into the Federal Reserve’s next monetary policy decision, which could lead to significant dollar volatility.
Just today, the president of the Richmond Fed, Richard Barkin, warned that the fight against inflation “could cause a recession”, since the central bank’s rate hikes are challenged by artificial elements such as “the high saving of the consumers and the lack of labor supply”. These comments could have curbed the dollar bulls.
USD/JPY: Risk of a pullback to 142 – SocGen
The currency analysts at Société Générale warn of the risk of a pullback to 142 or below: “Projects near 142 and the lower band of the daily channel at 140.30/139.40 are important short-term support levels. Defense of this channel could signal continuation of the uptrend (…) Once the pair recovers the high of 152, a further leg up is not ruled out. In this scenario, 153.50 and the 1990 levels near 160 could be the next potential resistance.”
Technical levels to watch
Source: Fx Street
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