The U.S. dollar remains strong above the $105 mark following the Fed Chair’s statement. U.S. long-term Treasury yields have surged, indicating sustained elevated interest rates into the next year.
The U.S. dollar remains steadfast above the $105 mark, while the domestic stock market experienced turbulence after the recent Fed Chair’s statement. Investors grappled with the implications of the Fed’s messaging, resulting in a bearish outlook for equities. U.S. long-term Treasury yields surged to levels last seen in 2007, signalling market expectations of sustained elevated interest rates into the next year. In addition, The U.S. Initial Jobless Claims data depicted a robust labour market, with claims reaching their lowest point since January. This data further bolsters the Fed’s hawkish stance. Meanwhile, Japan’s CPI index outperformed expectations, sustaining a level above the Bank of Japan‘s targeted rate for 17 consecutive months. Market watchers await the Bank of Japan’s forthcoming monetary policy statement, set to be released today, to assess its impact on the Japanese yen‘s strength.
Dollar index
The US Dollar, after hitting recent highs, retraced slightly as investors capitalised on recent gains. However, the long-term outlook for the greenback leans towards a bullish trajectory, buoyed by rising US Treasury yields and expectations of further monetary tightening by the Federal Reserve. Additionally, an unexpected 9% drop in initial jobless claims, marking an eight-month low, signalled resilience in the US employment sector, further bolstering the US Dollar’s standing.
The Dollar Index is trading flat while currently testing the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 57, suggesting the index might experience technical correction since the RSI retreated sharply from overbought territory.
EUR/USD
The euro remains under pressure from the resurgent dollar, teetering on the edge of breaching its nearby support level at 1.0638. Following Wednesday’s FOMC statement, U.S. Treasury yields soared to their loftiest point since 2007. This surge reflects the market’s anticipation of the Federal Reserve maintaining interest rates at a restrictive level well into the forthcoming year. Additionally, the recent release of Initial Jobless Claims data underscores the robustness of the U.S. labour market, providing further impetus for the dollar’s strength.
EUR/USD is struggling to stay above its near support level at 1.0638; a break below will serve as a solid bearish signal for the pair. The MACD has been flowing below the zero line while the RSI hovers near the 50-level, suggesting a neutral-bearish signal for the pair.
USD/JPY
The Japanese yen mounted a sharp rebound in anticipation of the Bank of Japan’s monetary policy decisions, with market participants expecting a potential hawkish tone due to recent inflationary pressures. While economists anticipate that the Bank of Japan will maintain its existing policy, potential adjustments to its ultra-loose monetary settings in response to rising bond yields and inflationary trends are under scrutiny. Investors eagerly await Governor Kazuo Ueda’s briefing for insights into the bank’s timeline for phasing out its massive quantitative easing program.
USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 47, suggesting the pair to extend its losses toward support level since the RSI stays below the midline.
