USD/JPY: Dollar remains under modest pressure
Fawad Razaqzada February 8, 2023 7:17 AM
Did the Fed Chair say anything dovish? No. Was he super hawkish? Again, no.
The reaction to Jay Powell’s speech on Tuesday was a positive one for risk assets, which meant that the dollar would come under pressure given its general negative correlation with stocks. Did the Fed Chair say anything dovish? No. Was he super hawkish? Again, no. He was deemed neutral overall. Powell acknowledged that the disinflationary process is underway, but also suggested that interest rates may have to be pushed even higher if jobs data continues to show upside surprises. So, the dollar may yet make a comeback. One thing is for sure, it will be pretty volatile around key data releases moving forward, as investors speculate on the Fed’s next move.
Unfortunately, the economic calendar is quite quiet today, but the Fed’s Williams and Waller will be speaking later.
Among the dollar pairs to watch today is the USD/JPY, as speculation continues over who will replace Bank of Japan Governor Kuroda. The USD/JPY is also testing a very important technical level around 130.50 to 131.00, the base of the recent breakout.
If the dollar bulls want to take control back then they will need to step in right about now, around these levels. Otherwise, last week’s breakout would be regarded as a failed breakout, and thus lead to more technical selling in the days ahead. A move back above the high made in Asia overnight circa 131.35/40 could ignite fresh technical buying towards last week’s high and potential beyond.
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