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Dollar rally pauses on less hawkish Powell

The recent move higher in the greenback for dollar bulls has stalled after Fed Chair Powell offered little new to his previous comments from last week’s FOMC meeting.

Markets were expecting a more hawkish Powell to push back against his recent remarks, especially in light of the blowout NFP headline print on Friday.

But once more, he didn’t do that and the risk rally resumed after more choppy price action.

All eyes had turned to yesterday’s Powell commentary after his relatively sanguine and relaxed appearance at last week’s pivotal Fed meeting.

But dollar bulls were left hanging as, more or less, Powell stuck to the current script.

The algos were ready when he mentioned again that the disinflationary process had begun, with stocks going bid and the dollar selling off. But the Fed Chair caveated this by saying we are at the very early stages.

He added that if the strong labour market continues, policymakers may need to hike rates more than what is priced in.

Still, money markets were little changed and the dollar edged lower against all G10 currencies.

Powell isn’t to be swayed by one stonking NFP headline or jobs report.

Moves are choppy but the risk rally since the start of the year has lost some steam this month which has seen some buying in the buck.


The DXY index is stuck in a range between 103 and 103.85.

The 50-day simple moving average (SMA) has also capped the upside so far around 103.5.

The long-term trend is still bearish with support at around 103, where also resides the March 2020 pandemic spike high.

Dollar rally pauses on less hawkish Powell


Yen strength returns

USD/JPY is caught in the crosshairs of Treasury bond yields and the announcement of the next BoJ Governor.

Reports at the start of the week that a continuity candidate is in line to take over from the uber-dovish Governor Kuroda whose term finishes in April caused one of the biggest upside gaps in the pair in recent years.  

Traders sold the yen as bets on policy normalisation were reversed. These followed the shock December tweak to the BoJ’s YCC trading band which had potentially heralded a new era of more hawkish measures by the bank.

Much will now depend on the new Governor, with the nominee announcement to be put to Parliament possibly as early as next week.

Interestingly, we’ve seen the strongest wage growth in 25 years in Japan this week. The recent data heaps more pressure on the new Governor as Kuroda has long touted earnings growth as the key to reviving sustained inflation in the economy.

USD/JPY broke out of its descending bear channel on the blockbuster US NFP headline number on Friday.

But the 50-day simple moving average capped the upside, with added resistance from USDJPY’s 50% Fibonacci level from its 2022 ascent.

Initial support may arrive at its 21-day SMA, followed by the top of the downtrend channel.

Yen strength returns



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