- Fed Chairman Powell noted that the central bank will stick to a 25 basis point rate cut.
- Traders cut the probability of a rate cut of 50 basis points in November from 53.3% to 35.4%.
- Economists expect a slight improvement in job growth in the US.
USD/JPI price analysis shows recovery from recent lows after Powell’s hawkish remarks. Meanwhile, the yen licked its wounds after minutes from the Bank of Japan meeting revealed caution over near-term interest rate hikes.
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On Monday, Fed Chairman Powell struck a hawkish tone, noting that the central bank would stick with a 25 basis point rate cut going forward. At its last meeting, the Fed cut borrowing costs by an unexpected 50 basis points. After that, market participants moved to price in an over 50% chance of another significant rate cut.
However, following Powell’s speech, traders cut the likelihood of a 50 bps rate cut in November from 53.3% to 35.4%. Consequently, the dollar strengthened, pushing the USD/JPI pair higher. This week, the US will release several high-impact reports that shape the outlook for rate cuts. The most notable is the US non-farm payrolls report.
Economists expect a slight improvement in job growth, with the unemployment rate at 4.2%. If the numbers beat forecasts, rate cut bets will fall further, boosting the dollar. On the other hand, if the labor market shows deterioration, markets will increase the likelihood of another big rate cut.
Meanwhile, the yen gave up its election gains as policymakers sounded cautious in BoJ minutes. Most officials urged patience as market turmoil clouded the outlook. At the same time, the Fed’s recent rate cut has fueled fears about the US economy.
USD/JPI Key Events Today
- US ISM Manufacturing PMI
- US JOLTS Job Openings
USD/JPI Technical Price Analysis: Struggle Around 30-SMA
On the technical side, the USD/JPI price broke above the 30-SMA after finding support at the 1.1100 level. Meanwhile, the RSI is trading just above 50, favoring bullish momentum. The previous bullish trend stalled at the 1.1200 resistance level, where the bears made a candle that broke below the SMA.
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However, they failed to maintain a step down, leading to a rebound. USD/JPI could consolidate if price stays between 1.1200 resistance and 1.1100 support. However, if the bullish bias strengthens, the price could break above 1.1200 and make a new high.
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