FOREX: USD Index Consolidating Lurch Higher, Pressure on JPY Remains
Oct-30 16:47
- Post-Fed optimism for the US dollar has extended on Thursday, with the USD index (+0.32%) notably rising to the highest level since August 01. Price action has been underpinned by the market questioning the Fed’s December easing prospects, following Chair Powell’s acknowledgement that there are no foregone conclusions on another rate reduction in December.
- The greenback rally has been most notable against the Japanese yen, following the Bank of Japan remaining on hold and failing to provide any explicit signals regarding a December hike. The broad JPY weakness has prompted USDJPY to rally to fresh 8-month highs, reaching an intra-day peak of 154.45, an impressive 229 pips off initial session lows. Sights are on 154.80 next, the Feb 12 high.
- Elsewhere, GBP continued its run of poor form, with cable breaking a significant technical support level through 1.3140. Given the multiple daily lows and the significance of the level, market participants will quickly turn their attention to potential targets of a more protracted move lower. Ongoing fiscal concerns have been exacerbated on Thursday by rising uncertainty over Chancellor Reeve’s future amid new information coming to light surrounding a breach of housing rules.
- Downside levels for cable include 1.3041, the Apr 14 low and 1.2971, the 1.382 projection of the Sep 17 - 25 - Oct 1 price swing. Below here, the April 07 low is located at 1.2709. EURGBP has had a steadier session around 0.88, with topside targets for the ongoing rally include 0.8835 and 0.8875, the April 2023 high.
- The broad greenback strength has tilted EURUSD back below 1.16, narrowing the gap to 1.1542, the Oct 9 low. Clearance of this level would confirm a resumption of the bear cycle that started Sep 17, opening 1.1516, a Fibonacci retracement.
- Further Eurozone inflation data highlights the Friday calendar. China manufacturing and non-manufacturing PMIs are also scheduled, before Canada August GDP.
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